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Be Patient

Stock (Symbol) Stock Price

China Lodging Group (HTHT)

$23

Data is as of Expected to Report Sector

January 19, 2011

Mar 4

Retail & Travel

Sharek’s Take
David SharekChina Lodging will grow this year — HTHT stock might not. The World Expo was in China during 2011, from May-October. Rooms were filled and rates were high. 2011 brings normalcy to Chinese lodging, so 2010 will be tough to beat. Although this stock might tread water this year, look at how solid revenue growth is expected to be (per quarter, past figures in bold, estimates are not).
 
2010 35% 40% 51% 37%
2011 43% 30% 28% 42%
 
I’m delighted China Lodging should continue to grow rapidly in 2011. The problem the stock has is EPS are expected to come in at $0.56 in 2010, and $0.56 in 2011.
One-Year Chart
HTHT has a pretty chart pattern going for it — it could be forming a cup-and-handle. With profit growth estimates of 60% and 175% the next two quarters, there’s earnings power behind this stock. Unfortunately, the P/E of 41 (top/right) doesn’t scream value and 2010 & 2011 profits are expected to be $0.56 each year.
Earnings Table
Profits were up 320% last quarter as China Lodging made a bucket of money during the World Expo. Revenue grew 51%.
 
HTHT beat by 2 cents last quarter after upping those estimates by 9 cents the quarter before. Since HTHT has pretty much come in with profits double what we expected for two straight quarters, a good beat next quarter could cause the stock to take off and run. Unfortunately that would be 2010 Q4 making it even harder on 2011 Q4 to beat year-ago figures.
 
Annual Profit Estimates show flat profit growth ahead in 2011. Profits are expected to climb 77% in 2012 — 0% growth in 2011 and 77% in 2012, that’s what we’re looking at.
 
Profit growth looks awesome for the next three quarters. Four quarters from now profits could be down 14%.
Fair Value
At $23 HTHT is selling close to its 2011 Fair Value of $25. 2012 Fair Value is $45 — 94% higher than today’s price.
Ten-Year Chart
China Lodging went public in March 2010, opening at $13.50. Here’s the company earnings pre-IPO:2006 -0.06
2007 -0.25
2008 -0.33
2009   0.11I like this bade the stock is forming in the ten-year chart.
Power Ranking Bottom Line
Growth Portfolio 

18 of 18 

Despite the growth growth opportunity that exists for China Lodging, I think  the stock is selling where it should at this time. There’s substantial opportunity for investors who don’t mind looking at this stock until 2012.
 
HTHT is ranked 18th in the 20 stock Growth Portfolio Power Rankings. If this stock breaks out it move because profits are growing great. If this company whips estimates and guides higher for 2011, the stock could rise the same percentage as 2011 estimates do.
Aggressive Growth Portfolio 

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