Avoid: Choice Hotels International
Choice Hotels International (CHH) operates more than 6,200 hotels in 49 states under the Comfort Inn, Comfort Suites, Quality, Clarion, Sleep Inn, Econo Lodge, Rodeway Inn and Cambria Suites brands. The company’s properties are concentrated in the budget and economy niche — and that potentially poses headwinds for revenue and margins.
Although the company only missed analysts’ earnings expectations by a penny in the first quarter, earnings were down 8 cents a share year-over-year, and CHH’s 2013 guidance is soft.
One notable bright spot, however: Choice launched its SkyTouch technology division in April, which will accelerate its move to sell the cloud-based hotel management software to other industry players.
That said, CHH — which yields 1.8% in dividends — is pretty overpriced, too, thanks to a forward P/E of 19 and a PEG ratio of 4.3.
Although I think SkyTouch could make CHH an attractive opportunity in mid-to-late 2014, I’m not wild about the stock now.