The average target price of PK is 14 and suggests 27% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 21.0. This translates into 97% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 10.0. This is equivalent to 6% downside potential in the worst case. 

Park is the second largest publicly traded lodging REIT with a diverse portfolio of market-leading hotels and resorts with significant underlying real estate value. Park's portfolio currently consists of 60 premium-branded hotels and resorts with over 33,000 rooms primarily located in prime city center and resort locations.

Park Hotels & Resorts Inc.

Real Estate

The company pays dividends most of the time. It has paid dividends in almost every one of the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has been outstanding and can be rated excellent compared to its peers. At the same time, the average five-year yield has been significantly higher and exceeded nearly all its peers. The company distributes nearly all its profit as dividends (payout ratio above 90%, a negative factor). It will not be easy to sustain such an extreme payout ratio. It may also indicate a company's lack of profitable growth opportunities, which suggests doubtful prospects. On average, the company pays dividends every four months. 

PK reported revenue of USD 2 590mn in the last 12 months, down 0% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 41% from FY24 to USD 0.61. Market expects EPS to reach USD 0.74 in FY25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). It has underperformed this peer group by 20ppts over six months and grown 4ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 17.5% in the last 12 months, up from 15.5% in FY23. 

Historically, PK has reported weak net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 4.9%, a growth from 3.6% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 1.4% in the last 12 months, an increase from 1.0% in FY23. The market analysts predict that RoA will be -5.5% in FY24, again weaker than its peers. 

In the last 12 months, the return on capital employed (RoCE) grew to 1.5%, below the peers. The consensus estimate for FY24 for RoCE is -8.1%, again behind the peers. 

Park Hotels & Resorts Inc. reported a return on equity (RoE) of 3.5% in the last 12 months, up from 2.4% in FY23. The market consensus projects an RoE of -13.6% in FY24, again behind its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 0.0 in the past several years. This ratio implies a weak shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

PK boasts very high trading liquidity. The average private investor can sell his common position in the stock immediately. Liquidity is usually very stable and remains extremely favourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors and we point to negligible return on capital, inadequate interest coverage. We note resilient historical revenue growth and solid cash flow generation, among the positive credit factors. 

In highly turbulent market conditions, PK is as volatile as an index. In other words, the stock will move with the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be limited. 

In normal market circumstances, PK is moderately volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will move slightly wider than the index. The stock's losses on its worst days (less than 1-5% of the time) will range from limited to average. 

Considering past and projected metrics, the stock is slightly 'cheaper' than its peers. In particular, the stock is reasonably priced on P/E, 'cheap' on EV/EBITDA, undervalued on P/FCF. 

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Park Hotels & Resorts Inc.

$ 10.81

5

Park Hotels & Resorts Inc.

$ 10.81

5

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Profitability factor

Risk / Profitability

Risk factor

Profitability factor

$ 10.81

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