SoTHERLY Hotels (SOHO) is a rare investment opportunity with a 20% expected return on invested capital. Typically, obtaining such a return requires taking on substantial risk, but given its extreme undervaluation at a price to expected AFFO of only 5[x], SOHO provides investors with a superior risk/reward tradeoff.
The buy thesis
As SoTHERLY Hotels realizes its earnings and growth potential, the market should begin to assign a fairer valuation. I believe that achieving a proper valuation would provide current investors with over 100% upside and this valuation will be justified through fundamental analysis. Specifically, we will look at:
- Financial health
Let us dive right in.
Early in 2013 SOHO provided the following guidance: (click to...