Long-established in the REITs industry, Hersha Hospitality Trust (HT, Financial) has enjoyed a stellar reputation. It has recently witnessed a surge of 56.69%, juxtaposed with a three-month change of 70%. However, fresh insights from the GuruFocus Score Rating hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Hersha Hospitality Trust.
Decoding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- 1. Financial strength rank: 4/10
- 2. Profitability rank: 6/10
- 3. Growth rank: 1/10
- 4. GF Value rank: 8/10
- 5. Momentum rank: 4/10
Based on the above method, GuruFocus assigned Hersha Hospitality Trust the GF Score of 65 out of 100, which signals poor future outperformance potential.
Understanding Hersha Hospitality Trust's Business
Hersha Hospitality Trust is a self-advised real estate investment trust in the hospitality sector, which owns and operates high-quality upscale hotels in urban gateway markets. Its hotels are located in the central business districts and dense metropolitan centers of New York City, Boston, Washington, DC, Philadelphia, Miami, Los Angeles, and San Diego. The company's revenue streams include Hotel revenue and Other revenue. With a market cap of $394.59 million and sales of $373.68 million, the company has an operating margin of 8.46%.
Financial Strength Breakdown
Hersha Hospitality Trust's financial strength indicators present some concerning insights about the company's balance sheet health. The company's low cash-to-debt ratio at 0.24 indicates a struggle in handling existing debt levels. Additionally, the company's Altman Z-Score is just 0.61, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years.
Growth Prospects
A lack of significant growth is another area where Hersha Hospitality Trust seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -10.2 per year over the past three years, which underperforms worse than 86.75% of 634 companies in the REITs industry. Stagnating revenues may pose concerns in a fast-evolving market.
Conclusion
Given Hersha Hospitality Trust's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While the company has a strong reputation in the REITs industry, its current financial health and growth prospects may not live up to its historical performance. Therefore, investors should exercise caution and conduct thorough research before making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
