In This Article:
DiamondRock Hospitality Company (NYSE:DRH), which is in the reits business, and is based in United States, saw significant share price volatility over the past couple of months on the NYSE, rising to the highs of $12.51 and falling to the lows of $11.2. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether DiamondRock Hospitality’s current trading price of $11.2 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at DiamondRock Hospitality’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
See our latest analysis for DiamondRock Hospitality
What is DiamondRock Hospitality worth?
According to my valuation model, DiamondRock Hospitality seems to be fairly priced at around 16% below my intrinsic value, which means if you buy DiamondRock Hospitality today, you’d be paying a reasonable price for it. And if you believe that the stock is really worth $13.35, then there isn’t much room for the share price grow beyond what it’s currently trading. So, is there another chance to buy low in the future? Given that DiamondRock Hospitality’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us an opportunity to buy later on. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of DiamondRock Hospitality look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company’s future expectations. DiamondRock Hospitality’s earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? It seems like the market has already priced in DRH’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?