Is Choice Hotels (CHH) Pricing Leave Much Upside After Recent Share Price Rebound

• Wondering if Choice Hotels International is priced attractively right now, or if the current share price is already baking in most of the upside?
• The stock last closed at US$104.68, with returns of 8.7% over 7 days and 22.1% over 30 days, while the 1 year return is a 24.6% decline and the 3 year and 5 year returns are 5.5% and 1.5% respectively.
• Recent attention on Choice Hotels International has centered on how the business is positioned within the wider consumer services sector and how investors are reacting to that positioning. These themes help frame the recent share price moves and raise an important question about whether the current market view lines up with underlying value.
• On Simply Wall St's valuation checks, Choice Hotels International scores 3 out of 6 for being assessed as undervalued in some areas but not others. You can see this in more detail in the valuation score. Next, we will look at how different valuation approaches judge the stock, before finishing with a way to bring those methods together into a clearer picture.

Find out why Choice Hotels International's -24.6% return over the last year is lagging behind its peers.

Approach 1: Choice Hotels International Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow, or DCF, model estimates what a company could be worth today by projecting its future cash flows and then discounting those back to the present using a required rate of return.

For Choice Hotels International, the 2 Stage Free Cash Flow to Equity model starts with last twelve months Free Cash Flow of about $149 million, then uses analyst and extrapolated estimates for future cash flows. For example, Simply Wall St uses analyst inputs for 2026, with projected Free Cash Flow of $177.25 million, and then extends those projections out to 2035. Each of those future cash flows, such as the discounted values cited for 2026 through 2035, is brought back to today and summed to produce an estimated equity value.

On this basis, the DCF model arrives at an intrinsic value of about $64.89 per share for Choice Hotels International, compared with the recent share price of US$104.68. That gap implies the shares are around 61.3% above the DCF estimate, which suggests the stock is priced well ahead of this particular cash flow based valuation.

Result: OVERVALUED

Our Discounted Cash Flow (DCF) analysis suggests Choice Hotels International may be overvalued by 61.3%. Discover 877 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Choice Hotels International.

Approach 2: Choice Hotels International Price vs Earnings

P/E is a common way to look at profitable companies because it links what you are paying directly to the earnings the business is generating today. A higher or lower P/E can often reflect what the market is pricing in for future growth and risk, with faster growth or lower perceived risk often lining up with a higher “normal” P/E, and slower growth or higher risk lining up with a lower one.

Choice Hotels International currently trades on a P/E of 12.65x. That sits below the Hospitality industry average P/E of 22.02x and also below the peer group average of 29.27x. Simply Wall St’s “Fair Ratio” for the stock, at 15.06x, is a proprietary view of what the P/E might reasonably be, based on factors such as earnings growth, profit margins, industry, market cap and risk profile.

This Fair Ratio can be more tailored than a simple peer or industry comparison, because it adjusts for company specific characteristics rather than assuming all Hospitality stocks deserve the same multiple. Comparing the current 12.65x P/E to the 15.06x Fair Ratio suggests the shares are trading below this customised multiple.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1450 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Choice Hotels International Narrative

Earlier we mentioned that there is an even better way to understand valuation, so Narratives let you attach a clear story about Choice Hotels International to the numbers you care about, by linking your view of its future revenue, earnings and margins to a financial forecast, an assumed fair value, and then a simple comparison between that Fair Value and today’s Price, all within an easy tool on Simply Wall St’s Community page that millions of investors use, which automatically refreshes when new news or earnings arrive. For example, one investor might build a Narrative that leans toward the higher US$160 fair value based on confidence in global expansion and digital investment, while another might sit closer to the lower US$117 view because they focus more on RevPAR softness, franchise risks and balance sheet concerns.

Do you think there's more to the story for Choice Hotels International? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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