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Welcome Hyatt Hotels To Your Portfolio

Jun. 08, 2020 12:18 PM ETHyatt Hotels Corporation (H)2 Comments
David Trainer profile picture
David Trainer


  • Hyatt Hotels, with its leading profitability, strong balance sheet, and undervalued stock, presents another excellent buying opportunity for investors willing to look beyond the current economic crisis.
  • Hyatt’s large cash reserve and newly issued debt provide the liquidity it needs to survive the expected economic decline – and then some.
  • At the time of writing, H traded at its cheapest PEBV ratio (0.3) in the history of our model.
  • Looking for more stock ideas like this one? Get them exclusively at Value Investing 2.0 . Get started today »

This hotel operator has the liquidity to survive the COVID-19 driven economic crisis and is poised to expand its market share as the economy recovers. Hyatt Hotels Corp (NYSE:H) is this week’s Long Idea.

Another Quality Business Trading at a Historical Discount

Over the past several weeks, we’ve identified high-quality businesses in some of the industries most adversely impacted by the COVID-19 pandemic. While evaluating restaurants, malls, homebuilders, airlines, and even advertising agencies, we have found several hidden gems including SYSCO Corporation (SYY), Darden Restaurants (DRI), Cracker Barrel Old Country Store (CBRL), Simon Property Group (SPG), D.R. Horton (DHI), Southwest Airlines (LUV), and Omnicom Group (OMC).

Hyatt Hotels, with its leading profitability, strong balance sheet, and undervalued stock presents another excellent buying opportunity for investors willing to look beyond the current economic crisis.

Hyatt’s History of Profit Growth

Hyatt has a strong history of generating consistent profits. Over the past five years, Hyatt has grown revenue by 3% compounded annually and core earnings[1] by 12% compounded annually, per Figure 1. Since 2009 (the year of H’s IPO), Hyatt has grown core earnings by 46% compounded annually. The firm increased its core earnings margin year-over-year in seven of the past ten years and from less than 1% in 2009 to 13% TTM.

Figure 1: Hyatt’s Profitability Growth Since 2009

Hyatt’s improving profitability helps the business generate significant free cash flow (FCF). The company generated positive FCF in eight of the past 10 years (and each of the past six) and a cumulative $3.2 billion (71% of market cap) over the past five years. Hyatt’s $943 million in FCF over the TTM period equates to a 16% FCF yield, which is significantly higher than the Hotels & Entertainment Services Industry average of 2%.

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This article was written by

David Trainer profile picture
We aim to help investor make more intelligent capital allocation decisions. Our research is driven by proven-superior fundamental data, models and equity/credit ratings.

Analyst’s Disclosure: I am/we are long SYY, SPG, DHI, LUV, JPM, H.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (2)

Interesting article, thanks. Could you share your opinion, if you have any, on H vs HST?

This news :
"Hyatt Hotels (NYSE:H) has priced its public offering of $450M of 5.375% senior notes due 2025 and $450M 5.750% senior notes due 2030." (SA Apr. 22, 2020)
"Host Hotels & Resorts (NYSE:HST) draws down the entire $1.5B revolving portion of its credit facility with Bank of America N.A. The current interest rate of the borrowings is LIBOR + 90 basis points based on Host's current unsecured long-term debt rating." (Mar. 20, 2020)

tells me HST finances its needs much more cheaply. Since the difference in financing is above my grade, could you please elaborate in why H may have decided for paying such a huge interests?
patrickperraton profile picture
Thanks for the article. Agree it looks like a good buy.
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