Bear Of The Day: Extended Stay America (STAY) – September 17, 2019

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Extended Stay America (STAY Free Report) is a Zacks Rank #5 (Strong Sell) and it is the Bear of the Day today.  Let’s take a look at why this stock fell to the lowest of all the Zacks Ranks.  

Description

Extended Stay America, Inc., together with its subsidiaries, owns, operates, and manages hotels in the United States. As of February 27, 2019, the company had a network of 627 hotels. It serves customers in the mid-priced extended stay segment. The company also relicenses Extended Stay America brand to third party franchisees. Extended Stay America, Inc. was founded in 1995 and is headquartered in Charlotte, North Carolina.

Recent Earnings

On August 6, STAY reported EPS of $0.32 and that was one cent below the Zacks Consensus Estiamte of $0.33.  That was the second consecutive miss of a penny by STAY.

Estimates Fall

Following the second consecutive earnings miss, estimates have fallen.  The current quarter has slipped from $0.38 to $0.36.  Next quarter has also come in a penny to $0.21.

 The full year estimate has dropped from $1.09 to $1.03 over the last 60 days.  Next year has also seen a big move lower, dropping from $1.13 to $1.05 over the same time horizon.

Valuation

With the stock dropping the valuation is getting better, but it might still be a little high given the recent performance.  The forward earnings multiple of 14.5x is probably where it should be and the 2.15x book is maybe a little stretched.  THe price to sales multiple of 2.3x is what has me concerned as this is just a little above the industry average.

Chart

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2019-09-17 10:36:00

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