A Look at Choice Hotels (CHH) Valuation Following Record Q3 Profits and Upgraded Earnings Guidance

Choice Hotels International (CHH) reported strong third quarter results, with record adjusted EBITDA and a sharp increase in profit. The company's momentum comes largely from global expansion, higher franchise fees, and the completion of the Choice Hotels Canada acquisition.

See our latest analysis for Choice Hotels International.

Despite hitting record profitability on global expansion and lifting its earnings outlook, Choice Hotels International’s momentum has not yet translated to the stock price. Shares have delivered a 1-year total return of -29.7% and remain well off their highs. Still, the recent uptick following Q3 results suggests investors may be warming up as international growth and new initiatives take hold.

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With shares trading well below their highs while the company posts record profits and expands abroad, the question now is whether the market is undervaluing Choice Hotels, or if this recent growth story is already fully factored into the price.

Most Popular Narrative: 14.6% Undervalued

Choice Hotels International’s most widely followed narrative places its fair value at $117.50, notably higher than the last close price of $100.37. The narrative emphasizes forward momentum for the business despite recent share price underperformance.

Strong international expansion, including new direct franchising in Canada, a master franchising deal in China targeting 10,000 rooms, and increased presence in EMEA and South America, is set to capture rising global travel demand from growing middle-class populations. This is expected to drive future revenue and EBITDA growth that exceeds historical expectations.

Read the complete narrative.

Curious how aggressive global expansion, a fresh approach to franchise growth, and strategic brand upgrades might push this stock higher? The narrative’s bold targets hinge on quantitative drivers that most investors overlook. Click in to see the specific growth engine and critical financial leap powering this valuation.

Result: Fair Value of $117.50 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, slower recovery in government and international travel, as well as challenges in the midscale and extended stay segments, could still limit near-term growth for Choice Hotels.

Find out about the key risks to this Choice Hotels International narrative.

Build Your Own Choice Hotels International Narrative

If you want to dive deeper or reach your own conclusions, you can use our tools to build a custom narrative quickly. Do it your way

A great starting point for your Choice Hotels International research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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