3 Reasons Why China Lodging Group Stock Is Worth Buying

Shares of China Lodging Group, Limited (NASDAQ:HTHT) have rallied a momentous 151.9% in the past year, substantially outperforming 26.8% growth of the industry it belongs to. We believe higher earnings growth, given solid revenue per available room (RevPAR) trends, is likely to aid the stock in maintaining its solid performance in the quarters ahead.

Also, the company has an impressive earnings surprise history, with an average positive surprise of 33.68% in the trailing four quarters.

Further, it has been successful in gaining analysts’ confidence. Its current-year and next-year earnings estimates have moved up by 36.3% and 72.2%, respectively, in the last 60 days. As a result, the stock sports a Zacks Rank #1 (Strong Buy).

What Makes China Lodging Group a Solid Pick?

RevPar Growth: The company witnessed strong RevPAR growth in the recently reported (Aug 17) second quarter of 2017 backed by higher average daily rate (ADR) and occupancy. While blended RevPAR jumped 14%, same-hotel RevPAR rose 8.3% in the second quarter.

Going forward, improving market conditions, continuous upgrade to HanTing 2.0, growing demand for its midscale and upscale hotels, and the company’s direct sales efforts are expected to continue driving growth in RevPar in the back-half of the year.

Earnings per Share Growth: Arguably, nothing is more important than earnings growth as surging profit levels is often an indication of strong prospects (and stock price gains) for the company in question.

While China Lodging Group’ has a historical EPS growth rate of 36% compared with the industry average of 18.7%. Therefore, investors should really focus on its projected growth. The company is looking to grow at a rate of 82.3%, significantly higher than the industry average of 9.7%.

Superior Return on Equity: China Lodging Group delivered return on equity (ROE) of 17.3% in the trailing 12 months compared with the industry’s average of 7.3%. This supports its growth potential and indicates that the company reinvests more efficiently compared with its peers.

Key Picks

Some other top-ranked stocks in this sector include Marriott Vacations Worldwide Corporation (NYSE:VAC) , Callaway Golf Company (NYSE:ELY) and Red Lion Hotels Corporation (NYSE:RLH) . While Marriott Vacations sports the same bullish rank as China Lodging Group, Callaway Golf and Red Lion Hotels holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

In the trailing four quarters, Marriott Vacations, Callaway Golf and Red Lion Hotels pulled off an average positive earnings surprise of 3.59%, 23.29% and 35.69%, respectively.

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