Quantcast

Is Hersha Hospitality (HT) a Great Stock for Value Investors?


Shutterstock photo

Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn't want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let's put Hersha Hospitality Trust HT stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock's current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Hersha Hospitality has a trailing twelve months PE ratio of 8.20, as you can see in the chart below:

This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 stands at about 20.08. If we focus on the long-term PE trend, Hersha Hospitality's current PE level puts it below its midpoint over the past five years.

Further, the stock's PE also compares favorably with the Zacks classified Finance sector's trailing twelve months PE ratio, which stands at 16.83. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that Hersha Hospitality has a forward PE ratio (price relative to this year's earnings) of 9.60, so it is fair to expect an increase in the company's share price in the near future.

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock's price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, Hersha Hospitality has a P/S ratio of about 1.88. This is quite lower than the S&P 500 average, which comes in at 3.28 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.

If anything, HT is near the lower end of its range in the time period from a P/S metric, suggesting some level of undervalued trading-at least compared to historical norms.

Broad Value Outlook

In aggregate, Hersha Hospitality currently has a Zacks Value Style Score of 'A', putting it into the top 20% of all stocks we cover from this look. This makes Hersha Hospitality a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the PEG ratio for Hersha Hospitality is just 2, a level that is lower than the industry average of 2.84. The PEG ratio is a modified PE ratio that takes into account the stock's earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 7.89, which is far better than the industry average of 14.07. Clearly, HT is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Hersha Hospitality might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of 'D' and a Momentum score of 'A'. This gives HT a Zacks VGM score-or its overarching fundamental grade-of 'B'. (You can read more about the Zacks Style Scores here >> )

Meanwhile, the company's recent earnings estimates have been fairly bearish. The current quarter has seen seven estimates go lower in the past sixty days compared to one higher, while the full year estimate has seen seven down and none up in the same time period.

This has had a considerable impact on the consensus estimate though as the current quarter consensus estimate has dropped by 9.3% in the past two months, while the full year estimate has fallen by 1.7%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Hersha Hospitality Trust Price and Consensus

Hersha Hospitality Trust Price and Consensus | Hersha Hospitality Trust Quote

This bearish trend is why the stock has just a Zacks Rank #3 (Hold) and why we are looking for in-line performance from the company in the near term.

Bottom Line

Hersha Hospitality is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (among the Bottom 45%) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past two years, the Zacks categorized REIT-Equity Trust-Other industry has clearly underperformed the broader market, as you can see below:

So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.

Just Released - Driverless Cars: Your Roadmap to Mega-Profits Today

In this latest Special Report, Zacks' Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making - autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Hersha Hospitality Trust (HT): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Investing Ideas , Stocks
Referenced Symbols: HT



More from Zacks.com

Subscribe






Zacks.com
Contributor:

Zacks.com

Equity Research










Research Brokers before you trade

Want to trade FX?