RLJ Lodging Trust (NYSE:RLJ): A Fresh Look at Valuation After Q3 Earnings Reveal Operational Resilience

RLJ Lodging Trust (NYSE:RLJ) just reported its third quarter 2025 results, posting lower revenue and a net loss compared to last year. Despite those numbers, management kept full-year guidance unchanged and pointed to strong funds from operations.

See our latest analysis for RLJ Lodging Trust.

RLJ Lodging Trust’s share price has staged a modest rebound recently, jumping nearly 10% in the past month. However, the year-to-date share price return is still down over 27%. Short-term momentum is building slightly, but longer-term total shareholder returns remain firmly negative. This suggests the company’s strategic bets and ongoing renovations have yet to fully convince the market. With management looking ahead to a more favorable environment in 2026, investors are clearly weighing near-term headwinds against RLJ’s longer-term repositioning efforts.

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With RLJ trading at a steep discount to analyst targets and renovations nearing completion, the key question is whether investors are being offered genuine value or if the market has already anticipated any future recovery.

Price-to-Earnings of 149.7x: Is it justified?

RLJ Lodging Trust currently trades at a price-to-earnings (P/E) ratio of 149.7x, which is significantly higher than the last closing share price of $7.25 might suggest is warranted. This lofty valuation stands out, especially considering the company’s persistent share price weakness overall.

The P/E ratio compares a company's current share price to its per-share earnings and offers a snapshot of how much investors are willing to pay for one dollar of earnings. For hotel and resort REITs like RLJ, a high P/E ratio often signals investor optimism about future earnings or reflects a temporary dip in current profits. In RLJ's case, the market appears to be valuing the business much higher than its recent earnings would indicate.

Compared to industry benchmarks, RLJ's price-to-earnings ratio is striking. The global hotel and resort REITs industry averages just 16x, and even peer companies stand at an average of 24.2x. RLJ is also trading higher than its estimated fair price-to-earnings ratio of 135.8x. If the market were to shift toward this fair ratio, there could be substantial adjustment in RLJ’s valuation.

Explore the SWS fair ratio for RLJ Lodging Trust

Result: Price-to-Earnings of 149.7x (OVERVALUED)

However, RLJ's high valuation could come under pressure if industry demand stalls or if renovations do not boost earnings as quickly as expected.

Find out about the key risks to this RLJ Lodging Trust narrative.

Another View: SWS DCF Model Says Undervalued

While the price-to-earnings ratio paints RLJ Lodging Trust as overvalued, our DCF model offers a sharply different perspective. The SWS DCF model estimates RLJ’s fair value at $16.09 per share, which is much higher than its current trading price of $7.25. This deep discount points to significant potential upside, but does it really signal a hidden bargain, or is the market justifiably cautious?

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 RLJ Lodging Trust 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 884 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 RLJ Lodging Trust Narrative

If you want a different perspective or enjoy digging into the numbers yourself, you can build your own view of RLJ in just a few minutes, and even Do it your way.

A great starting point for your RLJ Lodging Trust research is our analysis highlighting 2 key rewards and 3 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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