With a daily gain of 56.29% and a three-month increase of 69.49%, Hersha Hospitality Trust (HT, Financial) has been making waves in the stock market. The company's Earnings Per Share (EPS) (EPS) stands at 3.1. But the question that arises is, is the stock fairly valued? This article aims to answer that question by delving deep into the company's valuation analysis. So, let's dive in.
A Glimpse into Hersha Hospitality Trust
Hersha Hospitality Trust is a self-advised real estate investment trust (REIT) in the hospitality sector. It owns and operates high-quality upscale hotels in urban gateway markets such as 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 stock price of $9.82 and a GF Value of $10.26, Hersha Hospitality Trust's stock appears to be fairly valued.
Understanding the GF Value
The GF Value is a proprietary measure that represents the current intrinsic value of a stock. It is calculated based on three factors: historical multiples that the stock has traded at, a GuruFocus adjustment factor based on the company's past returns and growth, and future estimates of the business performance. The GF Value Line on our summary page provides an overview of the fair value that the stock should be traded at.
According to GuruFocus Value calculation, Hersha Hospitality Trust's stock appears to be fairly valued. This means that the long-term return of its stock is likely to be close to the rate of its business growth.
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Assessing Hersha Hospitality Trust's Financial Strength
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid this, it's crucial to review a company's financial strength before deciding to purchase shares. Hersha Hospitality Trust has a cash-to-debt ratio of 0.24, which ranks better than 79.28% of 719 companies in the REITs industry. However, the overall financial strength of Hersha Hospitality Trust is 4 out of 10, indicating that its financial strength is poor.
Profitability and Growth of Hersha Hospitality Trust
Investing in profitable companies, especially those with consistent profitability over the long term, is less risky. Hersha Hospitality Trust has been profitable 7 over the past 10 years. Its operating margin is 8.46%, which ranks worse than 91.44% of 666 companies in the REITs industry. Overall, the profitability of Hersha Hospitality Trust is ranked 6 out of 10, indicating fair profitability.
Growth is one of the most important factors in the valuation of a company. Hersha Hospitality Trust's 3-year average revenue growth rate is worse than 86.75% of 634 companies in the REITs industry. However, its 3-year average EBITDA growth rate is 22.8%, which ranks better than 81.85% of 540 companies in the REITs industry, indicating better growth.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to the weighted average cost of capital (WACC) can also determine its profitability. 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. For the past 12 months, Hersha Hospitality Trust's ROIC is 2.25, and its cost of capital is 6.81.
Conclusion
In summary, the stock of Hersha Hospitality Trust (HT, Financial) shows every sign of being fairly valued. The company's financial condition is poor, and its profitability is fair. Its growth ranks better than 81.85% of 540 companies in the REITs industry. To learn more about Hersha Hospitality Trust stock, you can check out its 30-Year Financials here.
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