DiamondRock Hospitality Company (DRH) Stock Analysis & Winston Score

DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of a leading portfolio of geographically diversified hotels concentrated in top gateway markets and destination resort locations. The Company owns 31 premium quality hotels with over 10,000 rooms. The Company has strategically positioned its hotels to be operated both under leading global brand families as well as unique boutique hotels in the lifestyle segment.

Winston Score History

Score breakdown

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Quality

Gross Margin

54.4%

Healthy — 54.4% gross margin

Operating Margin

11.1%

Modest — 11.1% operating margin

ROCE

1.1%

Weak — 1.1% return on capital

ROIC between 0% and 5%. They earn a few cents back per dollar invested in the business.

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Growth

Sales YoY

-0.4%

Shrinking sales (-0.4% YoY)

EPS YoY

+153.7%

Earnings growing fast (153.7% YoY)

Earnings growing 25%+ a year. The compounder zone.

EPS Consistency

6/8 quarters

Earnings grew in most of the last 8 quarters

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Cash Flow

Cash Conversion

229%

Turns 229% of profit into real cash

FCF Margin

14.3%

Converts sales into free cash efficiently (14.3%)

FCF margin between 10% and 20%. Every $100 in sales becomes $10 to $20 in real cash.

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Stability

Debt / Equity

0.76

Moderate — manageable debt (0.76)

Interest Cover

2.70x

Tight — interest eats into profit (2.7x)

Interest coverage between 1 and 3. Profits cover interest, but with little room to spare.

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Valuation

P/E Ratio (TTM)

25.2x

no trend

Growth-priced — P/E 25.2

P/E above the market average. People are paying up for expected growth.

P/E vs Forward

+3.2

GROWING

Earnings expected to grow meaningfully — cheaper on forward P/E (25.2 → 22.0)

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Dividends

Dividend Yield

3.48%

no trend

Moderate income — 3.48% yield

Standard yield zone for stable dividend payers. A meaningful piece of total return.

Dividend Growth

-32.3%

no trend

Dividend cut (-32.3% YoY) — warning sign

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