Choice Hotels International, Inc. (CHH) Boasting a VC1 Score of 29

The Value Composite One (VC1) is a method that investors use to determine a company’s value.  The Value Composite score of Choice Hotels International, Inc. (CHH) is 29.  A company with a value of 0 is thought to be an undervalued company, while a company with a value of 100 is considered an overvalued company.  The VC1 is calculated using the price to book value, price to sales, EBITDA to EV, price to cash flow, and price to earnings.  Similarly, the Value Composite Two (VC2) is calculated with the same ratios, but adds the Shareholder Yield.  The Value Composite Two of Choice Hotels International, Inc. is 24. The Value Composite Three score, taking into account buyback yield, is at 21.

Investors looking to chalk up healthy returns in the stock market may need to pay attention to avoid common pitfalls. When the good times are rolling, investors may be highly tempted to move a lot of money into certain stocks that have been churning out returns. One problem with this approach is that a stock that has been hot for a few months might not be hot over the next three months. It is always important to remember that past performance does not guarantee future results. Getting into a stock too late may leave the average investor pounding the table as a former winner turns into a current loser. 

Free Cash Flow Growth is the free cash flow of the current year minus the free cash flow from the previous year, divided by last year’s free cash flow. Free cash flow (FCF) is the cash produced by the company minus capital expenditure. This cash is what a company uses to meet its financial obligations, such as making payments on debt or to pay out dividends. The Free Cash Flow Score (FCF Score) is a helpful tool in calculating the free cash flow growth with free cash flow stability – this gives investors the overall quality of the free cash flow. The FCF Yield of Choice Hotels International, Inc. (CHH) is 0.036234. Experts say the higher the value, the better, as it means that the free cash flow is high, or the variability of free cash flow is low or both.

The Price Index is a ratio that indicates the return of a share price over a past period. The price index of Choice Hotels International, Inc. (CHH) for last month was 1.018557. This is calculated by taking the current share price and dividing by the share price one month ago. If the ratio is greater than 1, then that means there has been an increase in price over the month. If the ratio is less than 1, then we can determine that there has been a decrease in price. Similarly, investors look up the share price over 12 month periods. The Price Index 12m for Choice Hotels International, Inc. (CHH) is 1.049663.

The EBITDA Yield is a great way to determine a company’s profitability.  This number is calculated by dividing a company’s earnings before interest, taxes, depreciation and amortization by the company’s enterprise value.  Enterprise Value is calculated by taking the market capitalization plus debt, minority interest and preferred shares, minus total cash and cash equivalents.  The EBITDA Yield for Choice Hotels International, Inc. (CHH) is 300905.1564. 

Altman Z

Choice Hotels International, Inc. (CHH) currently has an Altman Z score of 3.552421. The Z-Score for predicting bankruptcy was published in 1968 by Edward I. Altman, who was assistant professor of finance at New York University at that time. It measures the financial health of a company based on a set of income and balance sheet values. The Altman Z-Score predicts the probability that a firm will go bankrupt within 2 years. In its initial test, the Altman Z-Score was found to be 72% accurate in predicting bankruptcy two years before the event. In a series of subsequent tests, the model was found to be approximately 80%–90% accurate in predicting bankruptcy one year before the event

After a recent scan, we can see that Choice Hotels International, Inc. (CHH) has a EBIT Margin of 0.334641 and an EBITDA Margin of 0.356609. The EBITDA/EV stands at 0.066604.

This multiple is similar to Earnings Yield, but here we use Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) as Nominator). By doing this, we can compare companies with a different capital structure and capital expenditures. This way it gives a much better idea of the value of a company compared to the popular P/E ratio. As O’Shaughnessy explaines:

” Stocks that have very high debt levels often have low PE ratios, but this does not necessarily mean that they are cheap in relation to other securities. Stocks that are highly leveraged tend to have far more volatile PE ratios than those that are not. A stock’s PE ratio is greatly affected by debt levels and tax rates, whereas EBITDA/EV is not. To compare valuations on a level playing field, you need to account for how a company is financing itself and then compare how relatively cheap or expensive it is after accounting for all balance sheet items.”

James P. O’Shaugnessy in What works on Wall Street

You can think of it as the taking all the revenue and subtracting the costs that solely go into running the business. The downside of EBITDA is that it can be abused by companies declaring as “one-off” costs things that should really be considered normal costs. We use the EBITDA of the last 12 months.

Choice Hotels International, Inc. (CHH) has a current MF Rank of 857. Developed by hedge fund manager Joel Greenblatt, the intention of the formula is to spot high quality companies that are trading at an attractive price. The formula uses ROIC and earnings yield ratios to find quality, undervalued stocks. In general, companies with the lowest combined rank may be the higher quality picks.

The M-Score, conceived by accounting professor Messod Beneish, is a model for detecting whether a company has manipulated their earnings numbers or not. Choice Hotels International, Inc. (CHH) has an M-Score of -2.199751.  The M-Score is based on 8 different variables: Days’ sales in receivables index, Gross Margin Index, Asset Quality Index, Sales Growth Index, Depreciation Index, Sales, General and Administrative expenses Index, Leverage Index and Total Accruals to Total Assets.  A score higher than -1.78 is an indicator that the company might be manipulating their numbers.

Some of the best financial predictions are formed by using a variety of financial tools. The Price Range 52 Weeks is one of the tools that investors use to determine the lowest and highest price at which a stock has traded in the previous 52 weeks.  The Price Range of Choice Hotels International, Inc. (CHH) over the past 52 weeks is 0.787244.  The 52-week range can be found in the stock’s quote summary.

Investors might be looking into the magic eight ball trying to project where the stock market will be heading over the next few months. Some analysts believe that the market is ready to take a bearish turn, but others believe that there is still room for stocks to shoot higher. When the markets do have a sell-off, investors may be tempted to sell winners before they give up previous profits. Sometimes this may be justified, but other times this type of panic selling can cause investors to just have to repurchase shares at a higher price after the recovery. Keeping tabs on the underlying company fundamental data can help provide the investor with a better idea of whether to hold on to a stock or let it go. 

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