Today is Monday, March 18, 2019 and here’s your daily small cap valuation.
CorePoint Lodging (NYSE: CPLG) is a small-cap stock that could have a lot of potential. But it’s hard to value smaller companies like this. Conventional valuation metrics like price-to-earnings (P/E) ratio, profit margin, and return on equity (ROE) may not be available for them.
To get a sense of CorePoint Lodging’s true valuation, let’s compare it to its industry peers — and to itself one year ago. We’ll look at four small cap valuation metrics…
Price-to-Book Value (P/B) Ratio
CorePoint Lodging’s price-to-book value (P/B) ratio of 0.5614 is 64.10% lower than its industry average of 1.564. That’s good. A low P/B ratio indicates that the company has a solid balance sheet — and that based on its balance sheet, the stock is trading for unusually cheap.
Free Cash Flow Yield (FCF/Enterprise Value)
CorePoint Lodging’s free cash flow yield (FCF/EV) of -5.99% is 208.71% lower than its industry average of 5.51%. That’s not good. This metric compares free cash flow (the amount of cash left over after all expenses and capital expenditures have been paid) with enterprise value (a comprehensive alternative to market cap that includes cash and debt).
A low free cash flow yield indicates that a company is performing inefficiently — or that it’s struggling with the debt on its books.
Earnings per Share (EPS) Growth
CorePoint Lodging’s earnings per share (EPS) growth is undefined. That’s not good. This may indicate that the company has failed to report earnings data. We have to fault it for this.
Gross Margin Growth
CorePoint Lodging has not grown its gross margin in the last year. That’s not good. It indicates that the company is making less money from its operations over time.
CorePoint Lodging scored favorably on 1 of our 4 valuation metrics. With this in mind, we believe the stock is slightly overvalued.
We’ve been keeping an eye on a set of small-cap stocks that are a better value than CorePoint Lodging. These stocks have the potential for bigger gains — and they’re far less risky than the speculative small caps many investors gamble on. Enter your email below to learn more.
P.S. Got another small-cap stock you want us to test with our valuation metrics? Leave the ticker symbol in the comments below.