DiamondRock Hospitality Company

DRH

$12.06

-1.87%

N/A-$0.23

Real Estate

REIT - Hotel & Motel

NASDAQ

Active Trading

DiamondRock Hospitality Company (DRH) operates as an internally managed real estate investment trust (REIT), maintaining a distinguished and geographically varied portfolio of ...

Fundamental Analysis of DRH

Key Strengths

Diversified portfolio of high-quality hotels in prime urban and resort locations.

Long-term relationships with leading hotel brands (e.g., Marriott, Hilton) ensuring strong distribution and operational expertise.

Risk Factors

Exposure to economic downturns and cyclical fluctuations in travel and tourism demand.

High sensitivity to rising interest rates, which could increase borrowing costs and compress cap rates.

Profitability

Net Margin13.52%

Operating Margin16.09%

Valuation

P/E Ratio16.50x

Current Ratio15.32

Efficiency

ROE10.27%

ROA5.01%

Fundamental Analysis of DRH

DiamondRock Hospitality Company (DRH) is an internally managed REIT focused on owning high-quality upper-upscale hotels and resorts in urban and resort locations. As of the latest data, DRH's portfolio includes 31 hotels (or 34 per some sources) with over 10,000 rooms, operated under major brands like Marriott and Hilton or as independent boutiques. The company’s business model emphasizes asset management and strategic capital allocation to generate risk-adjusted returns. Financially, DRH shows a solid recovery in profitability with a net margin of 13.5% and an EBITDA margin of 29%. The current P/E ratio stands at 16.7, which is reasonable for a REIT, while the EV/EBITDA of 10.9 suggests a moderate valuation relative to peers. The balance sheet appears manageable with a debt-to-equity ratio of 0.785 and interest coverage of 3.0, though net debt to EBITDA of 3.3 indicates moderate leverage. Liquidity is very strong with a current ratio of 15.3, providing flexibility for growth or downturns. The company pays a dividend with a yield of 3.4% and a payout ratio of 53%, indicating sustainability. Revenue growth and EPS growth are likely positive as the hospitality sector rebounds, though specifics are not provided. Key strengths include a geographically diversified portfolio, strong brand partnerships, and a focus on high-barrier-to-entry markets. Risks include sensitivity to economic cycles, potential for rising interest rates, competition, and the inherent volatility of the hospitality industry. The stock trades at $12.23, near the lower end of its 52-week range, reflecting market sentiment. Overall, DRH exhibits a stable financial profile with moderate growth potential, making it suitable for income-oriented investors with a tolerance for cyclicality.

Key Strengths of DRH

Diversified portfolio of high-quality hotels in prime urban and resort locations.
Long-term relationships with leading hotel brands (e.g., Marriott, Hilton) ensuring strong distribution and operational expertise.
Self-advised management structure aligns interests with shareholders and reduces agency costs.
Strong liquidity with a current ratio of 15.3, providing financial flexibility.
Focus on upscale and lifestyle segments, commanding premium room rates and higher margins.
Disciplined capital allocation with a track record of strategic acquisitions and dispositions.
Dividend yield of 3.4% with a payout ratio of 53%, indicating sustainability and income potential.
Low expense ratios, as seen in low G&A to revenue, enhancing operational efficiency.

Risk Factors of DRH

Exposure to economic downturns and cyclical fluctuations in travel and tourism demand.
High sensitivity to rising interest rates, which could increase borrowing costs and compress cap rates.
Geographic concentration in certain urban and resort markets could amplify local shocks.
Operating leverage can amplify revenue declines during periods of low occupancy.
Competition from new hotel supply and alternative accommodations like Airbnb.
Reliance on third-party operators for daily operations, though mitigated by brand agreements.
Regulatory risks including zoning, environmental, and tax changes affecting REITs.
Potential for pandemic-related disruptions, as experienced with COVID-19.

Market Cap vs Revenue & Earnings

Earnings

n/a

Revenue

n/a

Market cap

$2.47B

16.5x

P/E Ratio

2.2x

P/S Ratio

Earnings & Revenue

Last Reportedn/a

Earnings per share (EPS)n/a

Gross Margin53.98%

Net Profit Margin13.52%

Debt/Equity Ratio0.79

Profitability Bridge (Current vs YoY)

How gross, operating and net margins shifted versus last year.

Revenue / Net Income / FCF History (USD B)

Growth Signals of DRH

Metric	Current	Previous	YoYYear-over-Year change: current quarter versus the same quarter last year.	QoQQuarter-over-Quarter change: current quarter versus the immediately previous quarter.	Signal
Revenue	—	—	—	—	Flat
Diluted EPS	—	—	—	—	Flat
Free Cash Flow	—	—	—	—	Flat

Profitability of DRH

Metric	Current	Previous	YoYYear-over-Year change: current quarter versus the same quarter last year.	QoQQuarter-over-Quarter change: current quarter versus the immediately previous quarter.	Signal
Net Margin	—	28.43%	—	—	Flat
Operating Margin	—	23.04%	—	—	Flat
ROE	—	—	—	—	Flat

Financial Health of DRH

Metric	Current	Previous	YoYYear-over-Year change: current quarter versus the same quarter last year.	QoQQuarter-over-Quarter change: current quarter versus the immediately previous quarter.	Signal
Current Ratio	—	15.322	—	—	Flat
Quick Ratio	—	15.322	—	—	Flat
Debt / Equity	—	0.785	—	—	Flat

Valuation of DRH

Metric	Current	Previous	YoYYear-over-Year change: current quarter versus the same quarter last year.	QoQQuarter-over-Quarter change: current quarter versus the immediately previous quarter.	Signal
P/E	—	6.92x	—	—	Flat
P/B	—	1.64x	—	—	Flat

Supply Chain of DRH

RELATIONS

Upstream

Marriott International, Inc.NASDAQ:MAR Hilton Worldwide Holdings Inc.NYSE:HLT InterContinental Hotels Group PLCNYSE:IHGAimbridge HospitalityHEI Hotels & ResortsEOS HospitalityEvolution Hospitality (subsidiary of Aimbridge Hospitality)Highgate HotelsSage Hospitality GroupSysco CorporationNYSE:SYY US Foods Holding Corp.NYSE:USFDGeneral Atlantic / Advent International / Lee Equity Partners

Downstream

Booking Holdings Inc.NASDAQ:BKNG Expedia Group, Inc.NASDAQ:EXPEBusiness / Corporate Travelers (B2B Segment)Group & Event CustomersLeisure Travelers (Direct & Brand.com)Global Distribution Systems (Amadeus, Sabre, Travelport)Unconfirmed

Proxies

Host Hotels & Resorts, Inc.NASDAQ:HST Apple Hospitality REIT, Inc.NYSE:APLE RLJ Lodging TrustNYSE:RLJ Pebblebrook Hotel TrustNYSE:PEB Xenia Hotels & Resorts, Inc.NYSE:XHR

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Plutux is not an investment adviser. Market data and AI-generated analysis are for information and education only, not investment advice. Disclaimer