Choice Hotels International (CHH): Evaluating Valuation After Cambria Expansion and New Market Launches

If you are tracking Choice Hotels International (CHH), the recent news of its upscale Cambria Hotels brand opening four new locations across the U.S. is likely on your radar. The addition of new properties in Templeton, Tampa, Plymouth, and Portland, along with an ambitious pipeline that includes Times Square and a first step into Canada, signals a clear effort to grow footprint and tap new markets. For investors, this expansion-focused move draws attention to CHH’s long-term strategy and could prompt a second look at what the market expects from the company.

Shares of Choice Hotels International have seen a mild slide this year, drifting down about 3% over the past twelve months and trading roughly 14% lower year to date. The stock’s short-term momentum has been range bound, with a dip of around 10% over the past month and only a slight decline over the last quarter. Despite the recent pullback, annual revenue grew 16% and net income increased 6%, which suggests that the expansion story is backed by stronger fundamentals and not just press releases.

With this expanded pipeline and a franchise model that continues to add new rooms, is the market overlooking the growth potential, or is investor caution justified because future gains are already reflected in the price?

Most Popular Narrative: 8.7% Undervalued

According to community narrative, analysts currently see Choice Hotels International as undervalued by nearly 9%, based on forward-looking market assumptions. This estimate is derived from expectations for robust revenue growth and moderate profit expansion over the coming years.

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 expansion is expected to drive future revenue and EBITDA growth that outpaces historical expectations.

Curious why analysts think there could be hidden upside in Choice Hotels right now? One key forecast included in this valuation challenges typical sector assumptions about growth and future profits. The narrative hints at bold projections that may surprise even seasoned market watchers. The financial blueprint behind this story reveals the numbers powering analyst optimism. Will these expectations hold up? Keep reading to learn what is fueling this premium today.

Result: Fair Value of $133.5 (UNDERVALUED)

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

However, persistent softness in global and government travel, along with economic uncertainty, could put pressure on revenues and test the growth thesis in the period ahead.

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

Another View: SWS DCF Model Signals Deeper Value

While the previous outlook is built on analyst forecasts, our DCF model tells a similar story by projecting future cash flows. This approach still finds the stock priced below its long-term worth. Could this more fundamental view be capturing something the market misses?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Choice Hotels International for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Choice Hotels International Narrative

If you have a different take or want to dig into the numbers yourself, you can easily build your own view of Choice Hotels in just a few minutes. So why not do it your way?

A great starting point for your Choice Hotels International research is our analysis highlighting 4 key rewards and 1 important warning sign 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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