3 Fastest-Growing Lodging Stocks

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Includes: CTRP, HMIN, IHG
by: Dividend Screen

Growth is good because it increases earnings meaningfully and lets the current P/E ratio go down. This is the reason investors pay 20, 50 or even 100 times earnings for an investment. But you really make money if you buy a stock that beats analyst expectations and generates additional growth. Let’s take a look into the lodging industry, an industry that I analyzed in the best yielding stocks a few months before.

When analyzing the lodging industry by growth stocks, my first condition is that the 5-year sales growth should be above 5 percent and the 5-year earnings per share growth is higher than the sales growth. Further, the company should have additional growth potential, measured by an expected 5-year EPS growth of more than 10 percent yearly. Finally, the growth should create value. This fact is covered by the ratio of return on investment (ROI). The ratio shows how efficiently a company converts its debt and equity into profits. I screened only stocks with a ROI of more than 15 percent. Here are the results:

1. Ctrip.com International (NASDAQ:CTRP) is located in China. The company has a market capitalization of $4.8 billion, generates revenue in an amount of $499.8 million and has a net income of $175.3 million. Its following P/E ratio is 29.1 and forward price to earnings 22.4, Price/Sales 9.6 and Price/Book ratio 4.6. Dividend Yield: 0 percent. The company grew 40.6 percent in sales and 31.6 percent in EPS over the past five years. For the upcoming five years, EPS growth is expected at 23.4 percent. The ROI is 18.0 percent.

2. Home Inns & Hotels Management (NASDAQ:HMIN) is located in China. The company has a market capitalization of $1.1 billion, generates revenue in an amount of $489.7 million and has a net income of $51.9 million. Its following P/E ratio is 25.3 and forward price to earnings 13.5, Price/Sales 2.2 and Price/Book ratio is not useful due to a too small equity. Dividend Yield: 0 percent. The company grew 61.7 percent in sales and 60.4 percent in EPS over the past five years. For the upcoming five years, EPS growth is expected at 20.5 percent. The ROI is 24.6 percent.

3. Intercontinental Hotels Group (NYSE:IHG) is located within the United Kingdom. The company has a market capitalization of $4.6 billion, generates revenue in an amount of $1.7 billion and has a net income of $308.0 billion. Its following P/E ratio is 15.1 and forward price to earnings 11.5, Price/Sales 2.7 and Price/Book ratio 11.4. Dividend Yield: 3.3 percent. The company grew 5.1 percent in sales and 24.8 percent in EPS over the past five years. For the upcoming five years, EPS growth is expected at 13.5 percent. The ROI is 16.0 percent.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.