Many times when I develop a screen, I set simple parameters that are based on a company's fundamentals. That said, this screen focuses on a major hospitality provider demonstrating 16.92% returns on equity (ROE) over the last 12 months, and yielding 1.8%. Investors who are just starting out should note the term 'Return on Equity' is defined as "the amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareholders have invested." In my opinion, the screen of companies based on ROE acts a stepping stone for a beginning investor.
Wyndham Worldwide Corp. (WYN) - trades in a 52-week range of $24.76 (52-week low) and $53.56 (52-week high), closed trading at $52.28/share on Friday. Based on the company's performance over the last two months, up nearly 4.50%, I am attracted to WYN for several reasons. First, the company has demonstrated a 16.92% return on equity over the last 12 months, which to me is pretty good considering industry competitor Hyatt Hotels (H) has only demonstrated a return on equity of 2.21%. The next variable I find attractive is the company's estimated quarterly growth. WYN is expected to grow 18.10% for the September quarter, which is pretty good considering Hyatt is expected to demonstrate negative growth of -14.80%. The third variable to consider is the company's EPS trends over the last four quarters, which have all been very positive. Investors should note that WYN has surpassed analyst estimates in each of those quarters by an average of 6.58%, which is pretty impressive considering Hyatt has only surpassed estimates in three of the four, and most recently missed estimates during the March quarter.
One of the secondary variables to consider when it comes to WYN is the company's annual dividend yield, which is currently 1.80% ($0.92). From an income standpoint, the yield is roughly 22.20% higher than that of Marriott International (MAR) which currently yields 1.40% ($0.52). The company's yield isn't the only secondary variable to consider. The expansion of Wyndham's global footprint is certainly something potential investors should examine a bit closer. On July 26th WYN announced the establishment of the Wyndham Grand Playa Blanca, which is a 220-room all-inclusive resort, located Coclé Province of Panama.
From a growth standpoint, I'd remain conservative when establishing a position in WYN since the company is expanding into such places as Panama, even though the company is expected to demonstrate growth of 18.10% during the September quarter, and 25.50% during the December quarter. It should be noted that WYN most recently surpassed analysts' estimates for the June quarter when they beat the street by $0.03/share, which a 3.5% beat to the upside. If the company can continue to surpass both EPS and growth estimates for the September and December quarters we could see the stock trade above the $60/share a mark.
Disclosure: I am long WYN.