Choice Hotels International Inc. Common Stock (CHH)

FairStock Score: 55/100 — STEADY

Key Financials

Strengths

• Generates $170 million in annual free cash flow (3.1% yield on market cap)
• High return on equity of 544.2% demonstrating efficient capital deployment

Concerns

• Trades significantly above Graham Number ($26) with negative 355% margin of safety—limited downside protection
• High leverage at 11.16x debt-to-equity increases financial risk and interest expense burden

AI Analysis

Choice Hotels International Inc. Common Stock is a small-cap consumer cyclical company valued at $5.5 billion. The business generates $981 million in annual revenue with a 6.5% net margin and $170 million in free cash flow. From a quality standpoint, Choice shows Altman Z-Score of 2.6 in the grey zone and extraordinary 544% return on equity. On valuation, the stock is reasonably priced at 15.2x earnings, with trades far above its Graham Number ($26) with no margin of safety. Growth dynamics show revenue growing at 0.1% and profit growth of -16.0%. Our composite FairStock Score of 55/100 reflects mixed fundamentals overall. Investors should weigh the business quality against the current price and their own margin of safety requirements.

Bull Case

Improving fundamentals and sector tailwinds could drive meaningful earnings growth, compressing the effective multiple for patient investors. With $170 million in annual free cash flow (3.1% yield), management has ample capital for buybacks, dividends, or accretive acquisitions.

Bear Case

Elevated leverage at 11.2x D/E means rising interest rates or revenue weakness could strain debt covenants and force asset sales at distressed prices. Regulatory changes, input cost inflation, or demand normalization represent underappreciated risks that could materially impact forward estimates.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer