Sunstone Hotel Investors Inc. Stock Upgraded (SHO)

NEW YORK ( TheStreet) -- Sunstone Hotel Investors (NYSE: SHO) has been upgraded by TheStreet Ratings from sell to hold. The company's strengths can be seen in multiple areas, such as its robust revenue growth, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and poor profit margins.

Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 17.1%. Since the same quarter one year prior, revenues rose by 38.5%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Even though the current debt-to-equity ratio is 1.15, it is still below the industry average, suggesting that this level of debt is acceptable within the Real Estate Investment Trusts (REITs) industry. Despite the fact that SHO's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.71 is high and demonstrates strong liquidity.
  • Net operating cash flow has decreased to $36.74 million or 11.61% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
  • 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 79.0% when compared to the same quarter one year ago, falling from $35.67 million to $7.48 million.

Sunstone Hotel Investors, Inc. operates as a real estate investment trust. The firm engages in the acquisition, ownership, asset management, renovation, and sale of luxury, upper upscale, and upscale full-service hotels in the United States. Its portfolio also includes mid-scale hotels. The company has a P/E ratio of 58.4, above the average real estate industry P/E ratio of 21.4 and above the S&P 500 P/E ratio of 17.7. Sunstone Hotel Investors has a market cap of $1.15 billion and is part of the financial sector and real estate industry. Shares are up 23.4% year to date as of the close of trading on Tuesday.

You can view the full Sunstone Hotel Investors Ratings Report or get investment ideas from our investment research center.
-- Written by a member of TheStreet RatingsStaff