At CA$1.91, Is It Time To Put American Hotel Income Properties REIT LP (TSE:HOT.UN) On Your Watch List?
American Hotel Income Properties REIT LP (TSE:HOT.UN), which is in the reits business, and is based in Canada, led the TSX gainers with a relatively large price hike in the past couple of weeks. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at American Hotel Income Properties REIT’s outlook and value based on the most recent financial data to see if the opportunity still exists.
View our latest analysis for American Hotel Income Properties REIT
What is American Hotel Income Properties REIT worth?
American Hotel Income Properties REIT is currently expensive based on my price multiple model, where I look at the company's price-to-earnings ratio in comparison to the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 48.61x is currently well-above the industry average of 7.41x, meaning that it is trading at a more expensive price relative to its peers. Furthermore, American Hotel Income Properties REIT’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach levels around its industry peers, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
What does the future of American Hotel Income Properties REIT look like?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to more than double over the next couple of years, the future seems bright for American Hotel Income Properties REIT. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in HOT.UN’s positive outlook, with shares trading above industry price multiples. However, this brings up another question – is now the right time to sell? If you believe HOT.UN should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on HOT.UN for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the positive outlook is encouraging for HOT.UN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on American Hotel Income Properties REIT. You can find everything you need to know about American Hotel Income Properties REIT in the latest infographic research report. If you are no longer interested in American Hotel Income Properties REIT, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
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.
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. Thank you for reading.
