Critical Survey: Diamondrock Hospitality (DRH) and Xenia Hotels & Resorts (XHR)

Diamondrock Hospitality (NYSE: DRH) and Xenia Hotels & Resorts (NYSE:XHR) are both mid-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their institutional ownership, profitability, valuation, analyst recommendations, earnings, risk and dividends.

Institutional & Insider Ownership

65.0% of Xenia Hotels & Resorts shares are held by institutional investors. 1.1% of Diamondrock Hospitality shares are held by insiders. Comparatively, 0.3% of Xenia Hotels & Resorts shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Risk & Volatility

Diamondrock Hospitality has a beta of 1.39, suggesting that its stock price is 39% more volatile than the S&P 500. Comparatively, Xenia Hotels & Resorts has a beta of 0.77, suggesting that its stock price is 23% less volatile than the S&P 500.

Dividends

Diamondrock Hospitality pays an annual dividend of $0.50 per share and has a dividend yield of 4.6%. Xenia Hotels & Resorts pays an annual dividend of $1.10 per share and has a dividend yield of 5.5%. Diamondrock Hospitality pays out 102.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Xenia Hotels & Resorts pays out 81.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Xenia Hotels & Resorts is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Diamondrock Hospitality and Xenia Hotels & Resorts’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Diamondrock Hospitality 11.47% 5.41% 3.23%
Xenia Hotels & Resorts 15.99% 8.91% 5.09%

Analyst Recommendations

This is a summary of current ratings and target prices for Diamondrock Hospitality and Xenia Hotels & Resorts, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Diamondrock Hospitality 3 4 6 0 2.23
Xenia Hotels & Resorts 0 2 2 0 2.50

Diamondrock Hospitality presently has a consensus target price of $11.48, suggesting a potential upside of 6.29%. Xenia Hotels & Resorts has a consensus target price of $21.00, suggesting a potential upside of 4.22%. Given Diamondrock Hospitality’s higher probable upside, equities analysts clearly believe Diamondrock Hospitality is more favorable than Xenia Hotels & Resorts.

Earnings and Valuation

This table compares Diamondrock Hospitality and Xenia Hotels & Resorts’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Diamondrock Hospitality $866.34 million 2.50 $242.01 million $0.49 22.04
Xenia Hotels & Resorts $916.60 million 2.35 $262.30 million $1.35 14.93

Xenia Hotels & Resorts has higher revenue and earnings than Diamondrock Hospitality. Xenia Hotels & Resorts is trading at a lower price-to-earnings ratio than Diamondrock Hospitality, indicating that it is currently the more affordable of the two stocks.

Summary

Xenia Hotels & Resorts beats Diamondrock Hospitality on 11 of the 16 factors compared between the two stocks.

About Diamondrock Hospitality

DiamondRock Hospitality Company is a real estate investment trust (REIT). As of December 31, 2016, the Company owned a portfolio of 26 hotels and resorts that contains 9,472 guest rooms located in 17 different markets in North America and the United States Virgin Islands. Its business is to acquire, own, asset manage and renovate hotel properties in the United States. Its portfolio is concentrated in gateway cities and destination resort locations. It conducts its business through an umbrella partnership REIT (UPREIT) in, which its hotels are owned by subsidiaries of its operating partnership, DiamondRock Hospitality Limited Partnership. The Company is the general partner of its operating partnership and owns, either directly or indirectly, all of the limited partnership units of its operating partnership. The Company leases all of its domestic hotels to taxable REIT subsidiary, Bloodstone TRS, Inc. (TRS) lessees.

About Xenia Hotels & Resorts

Xenia Hotels & Resorts, Inc. (Xenia) is a self-advised and self-administered real estate investment trust (REIT). The Company invests in premium full service, lifestyle and urban upscale hotels, with a focus on var ious markets, as well as leisure destinations in the United States. As of May 30, 2017, the Company owned 37 hotels, 35 of which are completely owned, comprising 10,783 rooms, across 18 states and the District of Columbia, including a majority interest in two hotels owned through two investments in real estate entities. The Company’s hotels are primarily operated and/or licensed by Marriott, Kimpton, Hyatt, Aston, Fairmont, Hilton and Loews, as well as independent management companies. As of May 30, 2017, the Company’s portfolio included Andaz Napa, Andaz San Diego, Andaz Savannah, Aston Waikiki Beach Hotel, Bohemian Hotel Celebration, (an Autograph Collection Hotel) and Bohemian Hotel Savannah Riverfront, (an Autograph Collection Hotel).

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