Summit Hotel Properties, Inc. (NYSE:INN), which is in the reits business, and is based in United States, saw significant share price movement during recent months on the NYSE, rising to highs of US$12.34 and falling to the lows of US$2.61. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Summit Hotel Properties's current trading price of US$2.61 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Summit Hotel Properties’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What's the opportunity in Summit Hotel Properties?
Good news, investors! Summit Hotel Properties is still a bargain right now according to my price multiple model, which compares the company's price-to-earnings ratio to the industry average. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Summit Hotel Properties’s ratio of 4.02x is below its peer average of 19.86x, which indicates the stock is trading at a lower price compared to the REITs industry. What’s more interesting is that, Summit Hotel Properties’s share price is quite volatile, which gives us more chances to buy since the share price could sink lower (or rise higher) in the future. This is based on its high beta, which is a good indicator for how much the stock moves relative to the rest of the market.
What does the future of Summit Hotel Properties look like?
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. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with an extremely negative double-digit change in profit expected over the next couple of years, near-term growth is certainly not a driver of a buy decision. It seems like high uncertainty is on the cards for Summit Hotel Properties, at least in the near future.
What this means for you:
Are you a shareholder? Although INN is currently trading below the industry PE ratio, the negative profit outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to INN, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on INN for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current price multiple, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Summit Hotel Properties. You can find everything you need to know about Summit Hotel Properties in the latest infographic research report. If you are no longer interested in Summit Hotel Properties, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. 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.
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