The firm said it raised its rating on the hotel franchisor as it believes most of the negative SkyTouch Technology news has already been priced in.
SkyTouch is a cloud technology solutions provider in the hotel industry, Choice Hotels invested in the company and in its latest earnings report issued on August 8, the company said it expects reductions in EBITDA from its investment to be approximately $20 million for the 2014 full year.
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"We rate CHOICE HOTELS INTL INC (CHH) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, good cash flow from operations, solid stock price performance and increase in net income. Although the company may harbor some minor weaknesses, we feel they are unlikely to have a significant impact on results."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
Separately, TheStreet Ratings team rates CHOICE HOTELS INTL INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
- CHH's revenue growth has slightly outpaced the industry average of 5.8%. Since the same quarter one year prior, revenues slightly increased by 3.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- 47.50% is the gross profit margin for CHOICE HOTELS INTL INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 17.90% is above that of the industry average.
- Net operating cash flow has significantly increased by 123.63% to $60.57 million when compared to the same quarter last year. In addition, CHOICE HOTELS INTL INC has also vastly surpassed the industry average cash flow growth rate of -21.95%.
- The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Hotels, Restaurants & Leisure industry average. The net income increased by 11.3% when compared to the same quarter one year prior, going from $31.81 million to $35.40 million.
- You can view the full analysis from the report here: CHH Ratings Report