DiamondRock Hospitality Company (NYSE:DRH): Immense Growth Potential?

The most recent earnings update DiamondRock Hospitality Company’s (NYSE:DRH) released in December 2018 suggested that the business faced a slight headwind with earnings deteriorating from US$92m to US$88m, a change of -4.5%. Below, I’ve laid out key growth figures on how market analysts view DiamondRock Hospitality’s earnings growth trajectory over the next few years and whether the future looks brighter. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

See our latest analysis for DiamondRock Hospitality

Market analysts’ consensus outlook for the coming year seems rather muted, with earnings increasing by a single digit 2.8%. The following years do not look much more exciting, with earnings reaching US$92m before falling in 2022.

NYSE:DRH Past and Future Earnings, April 26th 2019
NYSE:DRH Past and Future Earnings, April 26th 2019

While it is useful to understand the rate of growth each year relative to today‚Äôs value, it may be more beneficial to analyze the rate at which the earnings are growing on average every year. The advantage of this technique is that we can get a bigger picture of the direction of DiamondRock Hospitality’s earnings trajectory over the long run, irrespective of near term fluctuations, be more volatile. To calculate this rate, I put a line of best fit through the forecasted earnings by market analysts. The slope of this line is the rate of earnings growth, which in this case is 1.1%. This means, we can anticipate DiamondRock Hospitality will grow its earnings by 1.1% every year for the next few years.

Next Steps:

For DiamondRock Hospitality, I’ve compiled three important factors you should look at:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is DRH worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether DRH is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of DRH? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.