NEW YORK (TheStreet) -- Sunstone Hotel Investors (SHO) - Get Report was falling -1.8% to $14.60 after-hours Thursday after announcing it will buy a Maui resort and that it will issue more stock in a public offering.
Sunstone Hotel Investors will purchase to Wallea Beach Marriot Resort and Spa for $325.7 million. The hotel and spa holds 544 rooms, and sits on 22 acres on the Hawaiian island.
The company also announced it will issue 18 million shares of common stock in a public offering. Sunstone Hotel Investors will use the proceeds from the offering to pay for a portion of the resort acquisition. The proceeds will also be used for other potential future acquisitions and general corporate purposes.
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TheStreet Ratings team rates SUNSTONE HOTEL INVESTORS INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate SUNSTONE HOTEL INVESTORS INC (SHO) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and impressive record of earnings per share growth. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and poor profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 10.3%. Since the same quarter one year prior, revenues rose by 24.9%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Powered by its strong earnings growth of 80.00% and other important driving factors, this stock has surged by 32.94% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
- The gross profit margin for SUNSTONE HOTEL INVESTORS INC is currently extremely low, coming in at 6.15%. Regardless of SHO's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, SHO's net profit margin of -2.34% significantly underperformed when compared to the industry average.
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 120.0% when compared to the same quarter one year ago, falling from $28.62 million to -$5.73 million.
- You can view the full analysis from the report here: SHO Ratings Report
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.