After assessing leading travel stocks Playa Hotels & Resorts N.V. (PLYA) and Hall of Fame Resort & Entertainment Company (HOFV), I believe PLYA is the better investment based on fundamental factors discussed throughout this article. But before that, let’s take a look at the travel industry’s outlook.
Despite the sticky inflation, the travel and tourism industry is set to soar to new heights, with projected revenue reaching an impressive $854.80 billion in 2023. Moreover, industry experts anticipate a remarkable leap to $1.02 trillion by 2027, at a steady CAGR of 4.4%.
Furthermore, the hotel segment is expected to dominate the travel sector with a market volume of $408.80 billion in 2023.
In addition, the travel industry is recognizing the importance of digital transformation and is leveraging technology to enhance customer experiences and streamline operations. As a result, 74% of the total revenue in the industry is expected to be generated through online channels by 2027.
Over the past six months, PLYA has gained 47.5%, while HOFV has declined 42.9%. Moreover, PLYA has gained 38.4% year-to-date, while HOFV has declined 11.2% over the same time period. Also, PLYA has soared 40.6% over the past six months, but HOFV has tumbled 57.9% over the same time frame.
Here are the reasons I think PLYA could perform better in the near term:
Financial Results
PLYA’s total net revenues increased 23.9% year-over-year to $264.23 million in the fiscal first quarter that ended March 31, 2023. Its adjusted EBITDA rose 28% year-over-year to $98.49 million. Moreover, its adjusted net income and EPS grew 54.1% and 63.2% year-over-year to $49.02 million and $0.31, respectively.
On the other hand, HOFV’s fiscal first quarter (ended March 31, 2023) total operating expenses rose 46.6% year-over-year to $17.69 million. Its loss from operation grew 46.4% year-over-year to $14.66 million. The company’s net loss attributable to shareholders amounted to $19.61 million, compared to a net loss of $8.11 million in the same period in the prior year. Moreover, adjusted EBITDA was a loss of $12 million.
Analysts Expectations
PLYA and HOFV’s revenue is expected to rise 6.3% and 108.5% year-over-year to $231.12 million and $5.60 million, respectively, in the current quarter ending June 2023. However, PLYA’s and HOEV’s EPS are expected to decline 18.7% and 31.8% year-over-year to $0.12 and negative $2.32 in the same quarter, respectively.
In addition, PLYA’s revenue and EPS are expected to rise 1.1% and 11.1% year-over-year to $951.02 million and $0.51 in the current fiscal year 2023. HOFV’s EPS and revenue are expected to grow 2% and 75.2% year-over-year to negative $8.83 and $28 million in the current year, respectively.
Furthermore, PLYA has surpassed consensus revenue estimates in each of the trailing four quarters, which is impressive. On the other hand, HOFV has failed to exceed the consensus revenue estimates in three of the trailing four quarters.
Profitability
PLYA’s 40.05% trailing-12-month gross profit margin is higher than HOFV’s negative 178.29%. PLYA’s trailing-12-month EBIT margin of 16% is higher than HOFV’s negative 250.69%. In addition, PLYA’s trailing-12-month EBITDA margin of 24.69% is higher than HOFV’s negative 183.91%.
Therefore, PLYA is more profitable.
Valuation
In terms of forward EV/Sales, PLYA is currently trading at 2.27x, which is lower than HOFV’s 10.16x. Both the stock’s forward P/S multiple is 1.45.
POWR Ratings
PLYA has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, HOFV has an overall rating of F, translating to a Strong Sell. The POWR Ratings are calculated considering 118 different factors, each weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. PLYA’s trailing-12-month gross profit margin of 47.17% is 33.7% higher than the industry average of 35.27%. Its trailing-12-month EBIT margin of 16% is 117.4% higher than the 7.36% industry average. This justifies the stock’s B grade in Quality.
On the other hand, HOFV has an F grade for Quality. Its trailing-12-month negative gross profit margin of 178.29% is lower than the industry average of 35.27%. Its trailing-12-month negative EBIT margin of 250.69% is lower than the 7.36% industry average.
Among the 22 stocks in the B-rated Travel - Hotels/Resorts industry, PLYA is ranked #4, while HOFV is ranked last.
Beyond what we’ve stated above, we have also rated both stocks for Growth, Value, Momentum, Sentiment, and Stability. Click here to view PLYA’s ratings. Access all the ratings of HOFV here.
The Winner
The travel industry holds a bright outlook, presenting promising opportunities for companies in this sector to capitalize on.
PLYA is trading above its 50-day and 200-day moving averages of $9.15 and $7.33, indicating an uptrend. However, HOFV is trading below its respective moving averages of $7.81 and $11.80.
With strong financial performance, higher profitability, attractive valuation multiples, and superior price performance, PLYA emerges as a more compelling choice than HOFV for investors seeking opportunities in the travel sector.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the travel- hotels/resorts industry here.
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PLYA shares were trading at $9.39 per share on Friday morning, up $0.35 (+3.87%). Year-to-date, PLYA has gained 43.80%, versus a 11.99% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
Which Travel Stock Should You Buy: Playa Hotels & Resorts N.V. (PLYA) or Hall of Fame Resort & Entertainment Company (HOFV)? StockNews.com
