Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model. NEW YORK (TheStreet) -- Pebblebrook Hotel (NYSE:PEB) has been downgraded by TheStreet Ratings from buy to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.
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- The revenue growth came in higher than the industry average of 12.1%. Since the same quarter one year prior, revenues rose by 38.9%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- PEBBLEBROOK HOTEL TRUST has improved earnings per share by 42.9% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, PEBBLEBROOK HOTEL TRUST increased its bottom line by earning $0.13 versus $0.06 in the prior year. This year, the market expects an improvement in earnings ($0.37 versus $0.13).
- The strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 25.46%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year.Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market on the basis of return on equity, PEBBLEBROOK HOTEL TRUST underperformed against that of the industry average and is significantly less than that of the S&P 500.
- The gross profit margin for PEBBLEBROOK HOTEL TRUST is currently extremely low, coming in at 2.60%. Regardless of PEB's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, PEB's net profit margin of -0.24% significantly underperformed when compared to the industry average.
-- Written by a member of TheStreet Ratings Staff
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Pebblebrook Hotel Trust's Series B Cumulative Redeemable Preferred Shares Ex-Dividend Reminder - 12/27/13
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