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DiamondRock Hospitality Company (NYSE:DRH), which is in the reits business, and is based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. With many analysts covering the mid-cap stock, we may expect any price-sensitive announcements have already been factored into the stock’s share price. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on DiamondRock Hospitality’s outlook and valuation to see if the opportunity still exists.
Is DiamondRock Hospitality still cheap?Good news, investors! DiamondRock Hospitality is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $14.08, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that DiamondRock Hospitality’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from DiamondRock Hospitality?Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a relatively muted profit growth of 8.1% expected over the next couple of years, growth doesn’t seem like a key driver for a buy decision for DiamondRock Hospitality, at least in the short term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since DRH is currently undervalued, it may be a great time to accumulate more of your holdings in the stock. However, there are also other factors such as capital structure to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on DRH for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy DRH. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed buy.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on DiamondRock Hospitality. You can find everything you need to know about DiamondRock Hospitality in the latest infographic research report. If you are no longer interested in DiamondRock Hospitality, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at email@example.com.