Have you been paying attention to shares of Playa Hotels & Resorts (PLYA)? Shares have been on the move with the stock up 7.1% over the past month. The stock hit a new 52-week high of $9.77 in the previous session. Playa Hotels & Resorts has gained 47% since the start of the year compared to the 9.9% move for the Zacks Consumer Discretionary sector and the 15.4% return for the Zacks Hotels and Motels industry.
What's Driving the Outperformance?
The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on February 23, 2023, Playa Hotels reported EPS of $0.13 versus consensus estimate of $-0.01.
For the current fiscal year, Playa Hotels is expected to post earnings of $0.57 per share on $913.64 million in revenues. This represents a 14% change in EPS on a 6.7% change in revenues. For the next fiscal year, the company is expected to earn $0.62 per share on $941.66 million in revenues. This represents a year-over-year change of 8.77% and 3.07%, respectively.
Playa Hotels may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Playa Hotels has a Value Score of B. The stock's Growth and Momentum Scores are A and F, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 16.7X current fiscal year EPS estimates, which is not in-line with the peer industry average of 21.6X. On a trailing cash flow basis, the stock currently trades at 9.4X versus its peer group's average of 16.2X. Additionally, the stock has a PEG ratio of 4.88. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Playa Hotels currently has a Zacks Rank of #1 (Strong Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Playa Hotels fits the bill. Thus, it seems as though Playa Hotels shares could have potential in the weeks and months to come.
How Does PLYA Stack Up to the Competition?
Shares of PLYA have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Marriott International, Inc. (MAR). MAR has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of C, and a Momentum Score of A.
Earnings were strong last quarter. Marriott International, Inc. beat our consensus estimate by 12.37%, and for the current fiscal year, MAR is expected to post earnings of $7.89 per share on revenue of $23.01 billion.
Shares of Marriott International, Inc. have gained 9.8% over the past month, and currently trade at a forward P/E of 22.61X and a P/CF of 22.95X.
The Hotels and Motels industry is in the top 31% of all the industries we have in our universe, so it looks like there are some nice tailwinds for PLYA and MAR, even beyond their own solid fundamental situation.
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