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Choice Hotels International, Inc.'s (NYSE:CHH) announced its latest earnings update in December 2018, which suggested that the company experienced a sizeable tailwind, eventuating to a high double-digit earnings growth of 77%. Investors may find it useful to understand how market analysts predict Choice Hotels International's earnings growth outlook over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.
Check out our latest analysis for Choice Hotels International
Analysts' outlook for the upcoming year seems rather subdued, with earnings growing by a single digit 2.1%. The growth outlook in the following year seems much more buoyant with rates generating double digit 11% compared to today’s earnings, and finally hitting US$287m by 2022.
While it is helpful to understand the growth rate each year relative to today’s figure, it may be more valuable determining the rate at which the company is moving every year, on average. The pro of this approach is that we can get a bigger picture of the direction of Choice Hotels International's earnings trajectory over the long run, irrespective of near term fluctuations, which may be more relevant for long term investors. To compute this rate, I put a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 6.5%. This means, we can assume Choice Hotels International will grow its earnings by 6.5% every year for the next few years.
Next Steps:
For Choice Hotels International, I've compiled three key factors you should look at:
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Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
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Valuation: What is CHH worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether CHH is currently mispriced by the market.
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Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of CHH? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.