Intrinsic value of Summit Hotel Properties - INN

Previous Close

$11.28

  Intrinsic Value

$3.04

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  Rating & Target

str. sell

-73%

Previous close

$11.28

 
Intrinsic value

$3.04

 
Up/down potential

-73%

 
Rating

str. sell

Our model is not good at valuating stocks of financial companies, such as INN.

We calculate the intrinsic value of INN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.2

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  18.00
  16.70
  15.53
  14.48
  13.53
  12.68
  11.91
  11.22
  10.60
  10.04
  9.53
  9.08
  8.67
  8.30
  7.97
  7.68
  7.41
  7.17
  6.95
  6.76
  6.58
  6.42
  6.28
  6.15
  6.04
  5.93
  5.84
  5.76
  5.68
  5.61
Revenue, $m
  608
  710
  820
  939
  1,066
  1,201
  1,344
  1,494
  1,653
  1,819
  1,992
  2,173
  2,361
  2,557
  2,761
  2,973
  3,194
  3,422
  3,660
  3,908
  4,165
  4,432
  4,711
  5,000
  5,302
  5,617
  5,945
  6,287
  6,644
  7,017
Variable operating expenses, $m
  502
  586
  676
  774
  879
  991
  1,109
  1,233
  1,364
  1,500
  1,643
  1,793
  1,948
  2,110
  2,278
  2,453
  2,635
  2,824
  3,020
  3,224
  3,436
  3,657
  3,886
  4,125
  4,374
  4,634
  4,905
  5,187
  5,482
  5,789
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  502
  586
  676
  774
  879
  991
  1,109
  1,233
  1,364
  1,500
  1,643
  1,793
  1,948
  2,110
  2,278
  2,453
  2,635
  2,824
  3,020
  3,224
  3,436
  3,657
  3,886
  4,125
  4,374
  4,634
  4,905
  5,187
  5,482
  5,789
Operating income, $m
  106
  124
  143
  164
  186
  210
  235
  262
  289
  318
  349
  380
  413
  448
  483
  520
  559
  599
  641
  684
  729
  776
  824
  875
  928
  983
  1,040
  1,100
  1,163
  1,228
EBITDA, $m
  208
  243
  280
  321
  364
  411
  460
  511
  565
  622
  681
  743
  808
  875
  945
  1,017
  1,092
  1,171
  1,252
  1,337
  1,425
  1,516
  1,611
  1,710
  1,814
  1,921
  2,033
  2,151
  2,273
  2,400
Interest expense (income), $m
  26
  47
  56
  66
  77
  88
  101
  114
  128
  143
  158
  175
  192
  209
  228
  247
  267
  288
  309
  332
  355
  379
  405
  431
  458
  487
  516
  547
  579
  613
  648
Earnings before tax, $m
  60
  68
  78
  88
  98
  109
  121
  133
  146
  160
  174
  189
  204
  220
  236
  253
  271
  289
  309
  329
  349
  371
  393
  417
  441
  467
  493
  521
  550
  580
Tax expense, $m
  16
  18
  21
  24
  26
  30
  33
  36
  40
  43
  47
  51
  55
  59
  64
  68
  73
  78
  83
  89
  94
  100
  106
  113
  119
  126
  133
  141
  149
  157
Net income, $m
  43
  50
  57
  64
  72
  80
  88
  97
  107
  117
  127
  138
  149
  160
  172
  185
  198
  211
  225
  240
  255
  271
  287
  304
  322
  341
  360
  380
  402
  424

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  2,610
  3,046
  3,519
  4,028
  4,573
  5,153
  5,767
  6,414
  7,093
  7,805
  8,549
  9,326
  10,134
  10,976
  11,851
  12,761
  13,706
  14,689
  15,710
  16,771
  17,875
  19,023
  20,218
  21,461
  22,757
  24,107
  25,515
  26,984
  28,516
  30,117
Adjusted assets (=assets-cash), $m
  2,610
  3,046
  3,519
  4,028
  4,573
  5,153
  5,767
  6,414
  7,093
  7,805
  8,549
  9,326
  10,134
  10,976
  11,851
  12,761
  13,706
  14,689
  15,710
  16,771
  17,875
  19,023
  20,218
  21,461
  22,757
  24,107
  25,515
  26,984
  28,516
  30,117
Revenue / Adjusted assets
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
  0.233
Average production assets, $m
  2,133
  2,490
  2,876
  3,293
  3,738
  4,212
  4,714
  5,242
  5,798
  6,380
  6,988
  7,622
  8,283
  8,971
  9,687
  10,430
  11,203
  12,006
  12,841
  13,708
  14,610
  15,549
  16,525
  17,542
  18,601
  19,704
  20,855
  22,055
  23,308
  24,616
Working capital, $m
  -5
  -6
  -7
  -8
  -10
  -11
  -12
  -13
  -15
  -16
  -18
  -20
  -21
  -23
  -25
  -27
  -29
  -31
  -33
  -35
  -37
  -40
  -42
  -45
  -48
  -51
  -54
  -57
  -60
  -63
Total debt, $m
  1,037
  1,221
  1,421
  1,637
  1,867
  2,113
  2,372
  2,646
  2,933
  3,235
  3,549
  3,878
  4,220
  4,576
  4,946
  5,331
  5,731
  6,146
  6,578
  7,027
  7,494
  7,980
  8,485
  9,011
  9,559
  10,130
  10,726
  11,347
  11,995
  12,672
Total liabilities, $m
  1,104
  1,288
  1,489
  1,704
  1,935
  2,180
  2,439
  2,713
  3,001
  3,302
  3,616
  3,945
  4,287
  4,643
  5,013
  5,398
  5,798
  6,213
  6,645
  7,094
  7,561
  8,047
  8,552
  9,078
  9,626
  10,197
  10,793
  11,414
  12,062
  12,739
Total equity, $m
  1,506
  1,758
  2,030
  2,324
  2,639
  2,973
  3,327
  3,701
  4,093
  4,504
  4,933
  5,381
  5,847
  6,333
  6,838
  7,363
  7,909
  8,475
  9,065
  9,677
  10,314
  10,976
  11,666
  12,383
  13,131
  13,910
  14,722
  15,570
  16,454
  17,377
Total liabilities and equity, $m
  2,610
  3,046
  3,519
  4,028
  4,574
  5,153
  5,766
  6,414
  7,094
  7,806
  8,549
  9,326
  10,134
  10,976
  11,851
  12,761
  13,707
  14,688
  15,710
  16,771
  17,875
  19,023
  20,218
  21,461
  22,757
  24,107
  25,515
  26,984
  28,516
  30,116
Debt-to-equity ratio
  0.690
  0.690
  0.700
  0.700
  0.710
  0.710
  0.710
  0.710
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.720
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
  0.730
Adjusted equity ratio
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577
  0.577

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  43
  50
  57
  64
  72
  80
  88
  97
  107
  117
  127
  138
  149
  160
  172
  185
  198
  211
  225
  240
  255
  271
  287
  304
  322
  341
  360
  380
  402
  424
Depreciation, amort., depletion, $m
  102
  119
  137
  157
  178
  201
  224
  250
  276
  304
  333
  363
  394
  427
  461
  497
  533
  572
  611
  653
  696
  740
  787
  835
  886
  938
  993
  1,050
  1,110
  1,172
Funds from operations, $m
  145
  168
  194
  221
  250
  280
  313
  347
  383
  420
  460
  501
  543
  588
  634
  682
  731
  783
  837
  893
  951
  1,011
  1,074
  1,140
  1,208
  1,279
  1,353
  1,431
  1,511
  1,596
Change in working capital, $m
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -3
  -3
  -3
Cash from operations, $m
  146
  169
  195
  222
  251
  282
  314
  348
  384
  422
  461
  502
  545
  589
  635
  683
  733
  785
  839
  895
  953
  1,014
  1,077
  1,142
  1,211
  1,282
  1,356
  1,434
  1,515
  1,599
Maintenance CAPEX, $m
  -86
  -102
  -119
  -137
  -157
  -178
  -201
  -224
  -250
  -276
  -304
  -333
  -363
  -394
  -427
  -461
  -497
  -533
  -572
  -611
  -653
  -696
  -740
  -787
  -835
  -886
  -938
  -993
  -1,050
  -1,110
New CAPEX, $m
  -327
  -356
  -387
  -416
  -445
  -474
  -502
  -529
  -555
  -582
  -608
  -634
  -661
  -688
  -715
  -744
  -773
  -803
  -835
  -868
  -902
  -938
  -976
  -1,017
  -1,059
  -1,104
  -1,151
  -1,200
  -1,253
  -1,308
Cash from investing activities, $m
  -413
  -458
  -506
  -553
  -602
  -652
  -703
  -753
  -805
  -858
  -912
  -967
  -1,024
  -1,082
  -1,142
  -1,205
  -1,270
  -1,336
  -1,407
  -1,479
  -1,555
  -1,634
  -1,716
  -1,804
  -1,894
  -1,990
  -2,089
  -2,193
  -2,303
  -2,418
Free cash flow, $m
  -267
  -289
  -311
  -332
  -352
  -370
  -388
  -405
  -421
  -436
  -451
  -465
  -479
  -493
  -507
  -521
  -536
  -551
  -567
  -584
  -602
  -620
  -640
  -661
  -684
  -707
  -733
  -760
  -788
  -819
Issuance/(repayment) of debt, $m
  169
  184
  200
  215
  231
  245
  260
  274
  287
  301
  315
  328
  342
  356
  370
  385
  400
  416
  432
  449
  467
  486
  505
  526
  548
  571
  596
  621
  648
  677
Issuance/(repurchase) of shares, $m
  188
  202
  216
  230
  243
  255
  266
  276
  285
  294
  302
  310
  318
  325
  333
  340
  348
  356
  364
  373
  382
  392
  402
  413
  425
  438
  452
  467
  483
  500
Cash from financing (excl. dividends), $m  
  357
  386
  416
  445
  474
  500
  526
  550
  572
  595
  617
  638
  660
  681
  703
  725
  748
  772
  796
  822
  849
  878
  907
  939
  973
  1,009
  1,048
  1,088
  1,131
  1,177
Total cash flow (excl. dividends), $m
  90
  97
  106
  114
  122
  130
  137
  145
  152
  159
  166
  174
  181
  188
  196
  203
  211
  220
  228
  237
  247
  257
  267
  278
  290
  302
  315
  328
  343
  358
Retained Cash Flow (-), $m
  -232
  -252
  -273
  -294
  -314
  -335
  -354
  -373
  -392
  -411
  -429
  -448
  -467
  -486
  -505
  -525
  -546
  -567
  -589
  -612
  -637
  -662
  -689
  -718
  -748
  -779
  -812
  -847
  -884
  -923
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  -142
  -154
  -167
  -180
  -193
  -205
  -217
  -229
  -240
  -252
  -263
  -274
  -286
  -297
  -309
  -321
  -334
  -347
  -361
  -375
  -390
  -406
  -422
  -439
  -458
  -477
  -497
  -519
  -542
  -566
Discount rate, %
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
  -132
  -133
  -133
  -131
  -127
  -122
  -115
  -107
  -98
  -88
  -79
  -69
  -60
  -51
  -43
  -36
  -29
  -23
  -18
  -14
  -10
  -8
  -6
  -4
  -3
  -2
  -1
  -1
  0
  0
Current shareholders' claim on cash, %
  86.3
  75.4
  66.5
  59.3
  53.3
  48.3
  44.0
  40.4
  37.3
  34.6
  32.3
  30.2
  28.4
  26.8
  25.4
  24.1
  22.9
  21.9
  20.9
  20.0
  19.2
  18.4
  17.7
  17.1
  16.5
  15.9
  15.4
  14.8
  14.4
  13.9

Summit Hotel Properties, Inc. is a real estate investment trust (REIT). The Company is focused primarily on owning premium-branded, select-service hotels in the Upscale segment of the United States lodging industry. The Company's portfolio consists of 83 hotels with a total of 12,242 guestrooms located in 26 states. The Company's hotels are located in markets, such as business and corporate headquarters, retail centers, airports and tourist attractions. The Company's portfolio is located in urban and suburban markets. Based on total number of guestrooms, approximately 89% of the Company's portfolio is positioned in over 50 metropolitan statistical areas (MSAs), and approximately 96% is located within over 100 MSAs. Based on total number of guestrooms, approximately 99% of the Company's hotels operate under franchise brands owned by Marriott International, Inc., Hilton Worldwide, InterContinental Hotels Group, and an affiliate of Hyatt Hotels Corporation.

FINANCIAL RATIOS  of  Summit Hotel Properties (INN)

Valuation Ratios
P/E Ratio 9.8
Price to Sales 2.2
Price to Book 1
Price to Tangible Book
Price to Cash Flow 7.6
Price to Free Cash Flow -9.9
Growth Rates
Sales Growth Rate 2.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 3.4%
Cap. Spend. - 3 Yr. Gr. Rate -11.3%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 64.6%
Total Debt to Equity 64.6%
Interest Coverage 5
Management Effectiveness
Return On Assets 8.2%
Ret/ On Assets - 3 Yr. Avg. 7.2%
Return On Total Capital 6.8%
Ret/ On T. Cap. - 3 Yr. Avg. 5.6%
Return On Equity 11.6%
Return On Equity - 3 Yr. Avg. 9.8%
Asset Turnover 0.3
Profitability Ratios
Gross Margin 37.6%
Gross Margin - 3 Yr. Avg. 36.4%
EBITDA Margin 43.2%
EBITDA Margin - 3 Yr. Avg. 39.5%
Operating Margin 17.5%
Oper. Margin - 3 Yr. Avg. 15.5%
Pre-Tax Margin 22.6%
Pre-Tax Margin - 3 Yr. Avg. 18.3%
Net Profit Margin 22.8%
Net Profit Margin - 3 Yr. Avg. 18.3%
Effective Tax Rate -0.9%
Eff/ Tax Rate - 3 Yr. Avg. 1.5%
Payout Ratio 62%

INN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the INN stock intrinsic value calculation we used $515.377 million for the last fiscal year's total revenue generated by Summit Hotel Properties. The default revenue input number comes from 0001 income statement of Summit Hotel Properties. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our INN stock valuation model: a) initial revenue growth rate of 18% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.1%, whose default value for INN is calculated based on our internal credit rating of Summit Hotel Properties, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Summit Hotel Properties.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of INN stock the variable cost ratio is equal to 82.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for INN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Summit Hotel Properties.

Corporate tax rate of 27% is the nominal tax rate for Summit Hotel Properties. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the INN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for INN are equal to 350.8%.

Life of production assets of 21 years is the average useful life of capital assets used in Summit Hotel Properties operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for INN is equal to -0.9%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $1274.502 million for Summit Hotel Properties - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 104.744 million for Summit Hotel Properties is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Summit Hotel Properties at the current share price and the inputted number of shares is $1.2 billion.

RELATED COMPANIES Price Int.Val. Rating

COMPANY NEWS

▶ Summit Hotel Properties: 3Q Earnings Snapshot   [06:57PM  Associated Press]
▶ Is It Too Late To Buy Summit Hotel Properties Inc (NYSE:INN)?   [Sep-02-18 10:59AM  Simply Wall St.]
▶ North Phoenix hotel included in multiple property sale to New York buyer   [Aug-21-18 04:00AM  American City Business Journals]
▶ Summit Hotel Properties: 2Q Earnings Snapshot   [05:03AM  Associated Press]
▶ Summit Hotel Properties: 1Q Earnings Snapshot   [May-03-18 05:03AM  Associated Press]
▶ Summit Hotel Properties reports 4Q results   [05:03AM  Associated Press]
▶ Summit Hotel Properties reports 3Q results   [Oct-30-17 06:29PM  Associated Press]
▶ Crowdfund a downpayment for a home   [Oct-12-17 01:40PM  Yahoo Finance Video]
▶ Summit Hotel Properties reports 2Q results   [Aug-04-17 01:49AM  Associated Press]
▶ Summit Hotel Properties Appoints Independent Director   [Jul-10-17 04:35PM  PR Newswire]

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