Choice Hotels International, Inc. (CHH)
UndervaluedFundamental
69
Price
$102.41
Market Cap
$4.54B
Part 1 · What the company is worth
Overview
Choice Hotels does not own or run hotels: it licenses brand names such as Comfort Inn, Quality Inn and Radisson to independent owners, who pay to use the brand, reservation system and marketing in exchange for following its operating standards. The company owns a small number of hotels directly, but its business is franchising — collecting fees from thousands of properties it does not operate rather than running rooms itself.
How it makes money
Most revenue is franchise and management fees, charged as a percentage of each hotel's room revenue plus flat platform fees, so it rises and falls with how full and how expensive franchisees' rooms are, not with Choice's own costs. A large additional revenue line is money collected from franchisees for marketing and reservation systems and then spent on their behalf — this passes through the income statement without adding profit. A small owned-hotel portfolio and other services round out the total.
Revenue by segment
Royalty and initial franchise fees, plus fees from managed properties — the core, high-margin business of licensing the brand.
Money collected from franchisees to fund shared marketing and the central reservation system, then spent on those same services — a pass-through, not a profit source.
Room and other revenue from the small number of hotels Choice owns and operates directly, unlike the rest of its franchised system.
Fees from co-branded credit cards, procurement programs and other services sold to the franchise network beyond the core royalty.
Residual revenue lines not captured in the categories above.
Competitive moat
Switching costs · NarrowA hotel owner who signs a franchise agreement commits for years and invests in brand-standard renovations, so switching brands means losing that investment and the reservations that come through Choice's system and loyalty program. The moat is real but narrow: at renewal, owners can and do move to a rival chain if the economics no longer work.
What drives demand
CyclicalFranchise fees are a percentage of room revenue, so they track how much people travel and how much hotels can charge — both of which fall in a weak economy. Growth in the number of franchised hotels also depends on owners being able to get construction financing, which tightens in the same downturns that reduce travel.
Key risks
- Dependence on franchisee performance — Because fees are based on franchisees' room revenue, Choice's results depend on the ability of thousands of independent owners to compete for guests and to obtain financing to build or renovate — factors the company does not directly control.
- Economic weakness reduces travel — The company states that a weak U.S. or international economy reduces demand for hotel rooms and for new hotel development, which lowers both existing royalty fees and the pipeline of new franchised properties.
- Competition for franchisees — Growing the franchise system means competing against other chains for the same hotel owners, which can force Choice to lower fees or offer loans and guarantees as incentives, eating into the margin on new growth.
The case for
Buyers argue that a franchise model needs almost no capital of its own, converts room-revenue growth across thousands of hotels into high-margin fees, and that the brand and reservation system create enough switching cost to keep the franchise base growing net of defections.
The case against
Sellers fear that a travel downturn hits royalty fees directly, that competition among hotel chains for the same owners compresses fee rates over time, and that the large reimbursable-cost revenue line flatters the top line without adding real profit.
Written by the editors, published on August 18, 2026
Direct competitors
Who this company fights with for the same customers
Generated on September 18, 2026 with claude-haiku-4-5 — shared with all users
Wyndham is the other large pure-play US hotel franchisor in the economy and midscale segments, and its Days Inn, Baymont, La Quinta, Ramada and Echo Suites brands are named in Choice's own 10-K as the direct rivals of Quality Inn, Clarion and WoodSpring Suites.
Marriott competes for the same hotel developers and franchisees with Fairfield against Choice's Comfort brands, Courtyard and AC Hotels against Cambria, and StudioRes in midscale extended stay.
Hilton's Hampton and Hilton Garden Inn are the reference brands in the upper-midscale and upscale segments where Choice places Comfort and Cambria, and LivSmart and LivAway target the same extended-stay guests as WoodSpring and Everhome Suites.
Hyatt Place is cited by Choice as a principal competitor of Cambria Hotels, the upscale brand Choice is pushing as it moves its portfolio upmarket.
IHG franchises Holiday Inn Express, Holiday Inn, Candlewood Suites and Crowne Plaza, which Choice's annual report lists as the competing brands for Comfort, Clarion, Everhome Suites and Radisson.
A member-owned, privately held US chain whose Best Western and SureStay brands compete for the same independent hotel owners and roadside midscale and economy travellers as Quality Inn and Econo Lodge.
Balance Sheet & Liquidity
Revenue
$1.62B
Trailing 12 months (through 6/30/2026)
Net Income
$328M
Trailing 12 months (through 6/30/2026)
Free Cash Flow
-
Total Equity
$181M
Total Liabilities
$2.74B
Current Ratio
0.93
Interest Coverage
4.28
Debt/EBITDA
4.15
Earnings Per Share
Revenue & Net Income
Free Cash Flow
Income Breakdown
Historical statement
Margins over time
Debt over time
How heavy the debt is
Growth grid
Growth — Revenue
Fair Value Estimation
Fair Value
$180.35
Current Price
$102.41
Margin of Safety
+43.2%
Fair Value Range
$117.23 - $243.47
Spread across the valuation methods used, not a statistically calibrated confidence interval.
Estimation Methods
Valuation Metrics
P/E Ratio
14.51
ROE
204.1%
P/B Ratio
32.42
P/FCF
-
Gross Margin
-
ROIC
12.8%
Profitability Radar
Value Creation (Economic Moat)
ROIC
12.8%
WACC
6.7%
ROIC − WACC
+6.1 pp
ROIC exceeds the cost of capital — the company is creating value for shareholders.
Fundamental Analysis Criteria
Passed (15)
- EPS shows upward trend
- EPS CAGR 9.89%
- Price CAGR 6.13%
- ROIC 12.8%
- Operating Margin 25.2%
- Current Ratio
- Interest Coverage
- Debt/EBITDA
- Return on Tangible Assets
- ROE 215.1%
- Revenue Growth 5Y 15.6%
- PEG Ratio 0.32
- Share Dilution -3.1%
- Net Margin Trend 20.3% vs 19.5%
- Piotroski F-Score 6/9
Failed (8)
- P/B Ratio 32.42
- Debt/Equity ratio
- Low reliance on intangibles
- Price below Graham Number
- DCF valuation (Overvalued)
- Analyst Consensus 13% Buy
- Earnings Surprise avg -4.8%
- Earnings Quality (OCF/NI) 0.68
Unavailable (5)
- Gross Margin NaN%
- P/FCF NaN
- Dividend Payout NaN%
- Positive Free Cash Flow
- CapEx intensity
Piotroski F-Score
Mixed signals: some areas need attention
Earnings Quality
Moderate: some gap between profits and cash
Share Dilution
Buying back shares. Shareholder friendly
Institutional Holdings
Governance
Executive Team
| Name | Title | Age |
|---|---|---|
| Mr. Dominic E. Dragisich | President, CEO & Director | 43 |
| Mr. Scott E. Oaksmith | Chief Financial Officer | 53 |
| Mr. Patrick J. Cimerola | Chief Human Resources Officer | 56 |
| Mr. Tony Pallas | Chief Technology Officer | - |
| Mr. Jeffrey W. Lobb | Senior VP, General Counsel & Secretary | - |
| Ms. Noha Abdalla | Chief Marketing Officer | 47 |
| Mr. David A. Pepper | Chief Development Officer | 58 |
| Mr. Raul Ramirez Sanchez | Chief Segment & International Operations Officer | 41 |
| Ms. Megan Brumagim | VP of Upscale Brands & Chief Sustainability Officer | - |
| Ms. Sally Bartas | Chief Talent & Culture Officer | - |
Audit Risk
3
Board Risk
7
Compensation Risk
5
Shareholder Rights Risk
5
Part 2 · The price and when to enter
This part won't tell you whether the company is worth owning: it helps you choose when to buy it, once the fundamentals have convinced you. Inside: technical analysis, potential, historical drawdowns, gamma exposure.
Documents
- View document
Annual Report (10-K)
A yearly overview of the business, its financial results, and the risks it faces.
Filed on 2026-02-19
- View document
Quarterly Report (10-Q)
A snapshot of financial performance for the most recent three-month period.
Filed on 2026-08-05
- View document
Current Report (8-K)
An announcement of a major event, such as a leadership change or big news.
Filed on 2026-08-31
via SEC EDGAR
Income History
via SEC EDGAR
Latest News
Recent headlines for CHH, sourced from Markets Gazette.
- 3/2/2026NEUTRALChoice Hotels Senior VP Empties Out Stock Options Amid Retirement
Choice Hotels International saw a senior executive exercise all her remaining stock options in early February, ahead of her planned retirement in 2026. While this move is a common practice for executives nearing retirement, it does not provide a clear directional signal for the stock. Investors should interpret the event as part of the executive's personal financial planning and compensation management, rather than an indicator of changes in the company's operational or strategic outlook. There are no elements suggesting an immediate impact on Choice Hotels' valuation or future performance, maintaining a neutral view on the stock.
via Markets Gazette