As of October 10, 2023, Hyatt Hotels Corp (H, Financial) has witnessed a daily gain of 5.85% despite a 3-month loss of 7.88%. The Earnings Per Share (EPS) stands at 4.1. The question that arises is whether the stock is modestly undervalued. This article embarks on a valuation analysis journey, providing insights into the intrinsic value of Hyatt Hotels. We invite you to read on for a comprehensive understanding of the company's valuation.
Introducing Hyatt Hotels Corp (H, Financial)
Hyatt Hotels Corp (H) operates a diverse portfolio of owned, managed, and franchised properties across approximately 20 upscale luxury brands. These include vacation brands like Apple Leisure Group, Hyatt Ziva, and Hyatt Zilara, the recently launched full-service lifestyle brand Hyatt Centric, the soft lifestyle brand Unbound, and the wellness brand Miraval. The company expanded its portfolio with the acquisitions of Two Roads in November 2018 and Apple Leisure Group in 2021. With 55% of its total rooms in the Americas, 19% in the Asia-Pacific, and 26% in the rest of the world, Hyatt Hotels has a global presence.
Decoding the GF Value
The GF Value is a proprietary measure that reflects the intrinsic value of a stock. It is calculated based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value at which the stock should ideally trade. If the stock price is significantly above the GF Value Line, it is overvalued, and its future return is likely to be poor. Conversely, if it is significantly below the GF Value Line, its future return will likely be higher.
Hyatt Hotels Corp (H, Financial), with its current price of $110.57 per share and a market cap of $11.60 billion, appears to be modestly undervalued based on the GuruFocus Value calculation. Therefore, the long-term return of its stock is likely to be higher than its business growth.
Assessing Financial Strength
Before investing in a company's stock, it is crucial to evaluate its financial strength. Companies with poor financial strength pose a higher risk of permanent loss. The cash-to-debt ratio and interest coverage are effective indicators of a company's financial strength. Hyatt Hotels has a cash-to-debt ratio of 0.26, which is lower than 63.21% of 810 companies in the Travel & Leisure industry. The overall financial strength of Hyatt Hotels is 5 out of 10, indicating fair financial health.
Profitability and Growth
Investing in profitable companies carries less risk, particularly when they demonstrate consistent profitability over the long term. A company with high profit margins typically offers better performance potential than a company with low profit margins. Hyatt Hotels has been profitable for 8 out of the past 10 years. In the past 12 months, the company had revenues of $6.50 billion and Earnings Per Share (EPS) of $4.1. Its operating margin of 5.97% is lower than 52.03% of 811 companies in the Travel & Leisure industry, indicating fair profitability.
Growth is a critical factor in a company's valuation. Faster-growing companies, especially those with profitable growth, create more value for shareholders. The 3-year average annual revenue growth of Hyatt Hotels is 3.9%, ranking better than 62.66% of 758 companies in the Travel & Leisure industry. However, its 3-year average EBITDA growth rate is -13.6%, which is lower than 74.92% of 602 companies in the industry, implying a relatively poor growth scenario.
ROIC vs. WACC
Evaluating a company's profitability can also involve comparing its return on invested capital (ROIC) to its weighted cost of capital (WACC). ROIC measures how well a company generates cash flow relative to the capital it has invested in its business. WACC is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Hyatt Hotels's ROIC was 4.46, while its WACC came in at 9.27.
Conclusion
In conclusion, the stock of Hyatt Hotels Corp (H, Financial) appears to be modestly undervalued. The company's financial condition is fair, and its profitability is fair. However, its growth ranks lower than 74.92% of 602 companies in the Travel & Leisure industry. For more information about Hyatt Hotels stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
