Sunstone Hotel Investors, Inc. (NYSE: SHO)

Sector: Real Estate Industry: REIT - Hotel & Motel CIK: 0001295810
Market Cap 1.01 Bn
P/B 0.80
P/E 12.13
P/S 1.58
ROIC (Qtr) 1.87
Div Yield % 0.96
Rev 1y % (Qtr) 1.29
Total Debt (Qtr) 926.03 Mn
Debt/Equity (Qtr) 0.47
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About

Sunstone Hotel Investors, Inc., or SHO, is a real estate investment trust (REIT) that operates in the hospitality industry within the United States. The company's main business activities involve owning and managing a diverse portfolio of hotels, which are primarily located in key markets across six states and Washington D.C. These hotels operate under renowned brands such as Marriott, Hyatt, Four Seasons, and Hilton, with the exception of one independent resort, Oceans Edge Resort & Marina. SHO generates revenue through its hospitality services,...

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Investment thesis

Bull case

  • Operating cash flow of 175.63M provides strong 19.92x coverage of stock compensation 8.82M, indicating sustainable incentive practices.
  • Strong tangible asset base of 3.05B provides 3.29x coverage of total debt 926.03M, indicating robust asset backing and low credit risk.
  • Cash reserves of 197.57M provide ample 49.39x coverage of acquisition spending 4M, enabling strategic growth opportunities.
  • Strong free cash flow of 99.87M provides 24.97x coverage of acquisition spending 4M, indicating disciplined M&A strategy.
  • Free cash flow of 99.87M provides solid 0.70x coverage of operating expenses 141.75M, showing operational efficiency.

Bear case

  • Operating cash flow of 175.63M barely covers its investment activities of (70.76M), with a coverage ratio of -2.48, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 175.63M provides thin coverage of dividend payments of (87.38M) with a -2.01 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Operating earnings of 68.14M show weak coverage of depreciation charges of 131.48M, with a 0.52 ratio indicating high capital intensity and potential reinvestment needs.
  • High depreciation of 131.48M relative to operating cash flow of 175.63M, which is 0.75x suggests significant maintenance capital requirements affecting free cash flow.
  • Operating cash flow of 175.63M is outpaced by equity issuance of (105.95M) (-1.66 ratio), indicating concerning reliance on equity markets for funding operations.

Segments Breakdown of Revenue (2024)

Product and Service Breakdown of Revenue (2024)

Peer comparison

Companies in the REIT - Hotel & Motel
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 HST Host Hotels & Resorts, Inc. 11.01 Bn -1,000.50 3.81 5.64 Bn
2 RHP Ryman Hospitality Properties, Inc. 5.24 Bn 19.78 4.11 4.13 Bn
3 PK Park Hotels & Resorts Inc. 2.45 Bn 8.02 0.92 4.78 Bn
4 DRH DiamondRock Hospitality Co 1.84 Bn -111.00 2.53 1.19 Bn
5 XHR Xenia Hotels & Resorts, Inc. 1.80 Bn 16.40 1.94 1.42 Bn
6 PEB Pebblebrook Hotel Trust 1.65 Bn -3.89 3.73 2.57 Bn
7 RLJ RLJ Lodging Trust 1.36 Bn 31.88 1.08 2.34 Bn
8 APLE Apple Hospitality REIT, Inc. 1.13 Bn 14.99 3.09 1.62 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.82 0.89
EV to Cash from Ops. EV/CFO 15.50 26.26
EV to Debt EV to Debt 2.69 1.73
EV to EBIT EV/EBIT 14.37 25.23
EV to EBITDA EV/EBITDA 17.35 10.84
EV to Free Cash Flow [EV/FCF] EV/FCF -12.71 19.67
EV to Market Cap EV to Market Cap 2.46 13.92
EV to Revenue EV/Rev 3.89 3.79
Price to Book Value [P/B] P/B 0.80 2.70
Price to Earnings [P/E] P/E 12.13 -67.28
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.02 -3.61
Dividend Payout Ratio % Div Payout % (Qtr) 3,600.00 438.75
Dividend per Basic Share Div per Share (Qtr) 0.36 0.72
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 68.18 42.25
Interest Coverage Int. cover (Qtr) 1.37 1.26
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) -572.34 -27.90
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 2.60 82.84
Dividend Growth (1y) % Div 1y % (Qtr) -5.26 15.12
EBIAT Growth (1y) % EBIAT 1y % (Qtr) -70.17 -26.70
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -42.49 -3.05
EBIT Growth (1y) % EBIT 1y % (Qtr) -70.06 -26.98
EBT Growth (1y) % EBT 1y % (Qtr) -89.22 -431.84
EPS Growth (1y) % EPS 1y % (Qtr) -98.68 -120.53
FCF Growth (1y) % FCF 1y % (Qtr) -36.79 73.92
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 0.22 -2.32
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.31 0.34
Cash Payout Ratio Cash Payout (Qtr) 0.37 0.16
Cash Ratio Cash Ratio (Qtr) 0.00 0.00
Current Ratio Curr Ratio (Qtr) 0.00 0.07
Debt to Equity Ratio Debt/Equity (Qtr) 0.47 1.85
Interest Cover Ratio Int Coverage (Qtr) 1.37 1.26
Times Interest Earned Times Interest Earned (Qtr) 1.37 1.26
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 21.30 23.64
EBIT Margin % EBIT Margin % (Qtr) 7.26 9.54
EBT Margin % EBT Margin % (Qtr) 1.97 -0.79
Gross Margin % Gross Margin % (Qtr) 51.00 38.19
Net Profit Margin % Net Margin % (Qtr) 0.20 -2.21