NEW YORK (TheStreet) -- Shares of Diamond Resorts Int'l (DRII) are increasing 1.94% to $22.65 on Friday morning as MKM Partners initiated coverage of the stock with a "buy" rating and $27 price target.
The Las Vegas-based company is engaged in the hospitality, vacation ownership and timeshare industry.
Leisure-focused businesses will outperform in 2016 in a macro environment with robust consumer demand, according to the firm.
Diamond Resorts has: "(1) high customer satisfaction with repeat purchases; (2) a capital efficient model with low-cost inventory and higher return on invested capital (ROIC) vs. peers; (3) strong topline gross VOI sales growth (10-15% next 2-3 years); (4) potential future tuck-in acquisitions in a fragmented industry; and (5) about 31% of revenue comes from recurring fees," MKM Partners wrote in a note.
Additionally, the company launched a strategic review in February to unlock value for shareholders and the firm believes there is more upside potential to its price target should the review lead to a specific outcome.
Separately, TheStreet Ratings Team has a "Hold" rating with a score of C on the stock.
The primary factors that have impacted the rating are mixed.
The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and attractive valuation levels.
However, the team also finds weaknesses including generally higher debt management risk, weak operating cash flow and a generally disappointing performance in the stock itself.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
You can view the full analysis from the report here: DRII