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4 Reasons to Bet on Marriott Vacations (VAC) Stock Now

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Vacation ownership or timeshare business is one of the fastest evolving and most profitable sector in the hospitality industry. Increasing household income and ownership satisfaction, along with an inclination toward repeat purchases and frequent trips, are driving the industry’s growth.

Thus, positive timeshare industry trends make this the right time to add a few vacation ownership companies to your portfolio. Florida-based, Marriott Vacations Worldwide Corporation (VAC - Free Report) , one of the major players in the timeshare industry, is one such stock that is worth considering.

The stock holds a Zacks Rank #2 (Buy), which indicates robust fundamentals and expectations of outperformance in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

What Makes Marriott Vacations a Solid Choice?

Stock Price Movement & Other Returns: Marriott Vacations’ shares have outperformed the broader Zacks categorized Hotels and Motels industry over the past one year. While the stock gained over 60%, the broader industry grew nearly 26% in the same time frame.



Moreover, the return on equity (ROE) delivered in the trailing 12 months was an impressive 11.8% compared with the industry gain of 4%. This indicates that the company reinvests more efficiently than its peers.

Also, Marriott Vacations’ continuously returns wealth to shareholders via dividends and share repurchases. Consistent dividends serve as an indicator of a company’s financial stability as well as its profitability as dividends are paid out of retained earnings. Thus, Marriott Vacations seems to be in a stable financial position.

Solid Business Growth: Marriott Vacations has been able to maintain a steady flow of clients by offering tours to diverse locations and programs with greater outreach.

Notably, the company has been recording higher contract sales and rental revenues of late. Meanwhile, volume per guest – sales volume for a given period divided by the number of groups toured – for Marriott Vacations continues to increase backed by strong marketing initiatives.

Moreover, addition of new properties in the portfolio, along with renovation of the company’s various vacation ownership units, bodes well.

Valuation Looks Rational: Marriott Vacations has a Value Style Score of ‘B’, under our style score system. The Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and identify stocks that are truly trading at a discount.

The company currently has a trailing 12 months PE ratio of 21.11, comparing favorably with the Zacks classified Consumer Discretionary sector’s trailing twelve months PE ratio, which stands at 25.10. This indicates that the stock is relatively undervalued right now, compared to its peers.

Also, Marriott Vacations has a forward PE ratio (price relative to this year’s earnings) of just 15.49, making it fair to say that a slightly more value-oriented path may be ahead for Marriott Vacations stock in the near term too.

Looking at the sales of the company, the company is currently trading at a P/S ratio of 1.12, lower than the industry average of 1.66. This further deems the company undervalued in comparison to its industry peers and indicates a good time to buy.

Estimate Revisions: Over the past 60 days, the company has been seeing an upward trend in earnings estimate revision for 2016 and 2017. Positive earnings estimate revisions witnessed by the company indicate analysts’ confidence in the stock. Further, for the full year, EPS is expected to grow a solid 25.5%.

Bottom Line

Marriott Vacations faces tough competition from other vacation ownership companies like Wyndham Worldwide Corporation and bigger hospitality services giants like Hyatt Hotels Corporation (H - Free Report) and Hilton Worldwide Holdings, Inc. (HLT - Free Report) .

Yet, given the company’s credible performance compared to its peers as a result of the brand’s strong consumer affinity and solid business growth, the stock should keep performing well in the quarters ahead, making it a top investment choice.

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