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Extended Stay America (STAY) Soars to 52-Week High, Time to Cash Out?

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Shares of Extended Stay America have been strong performers lately, with the stock up 2.5% over the past month. The stock hit a new 52-week high of $20.1 in the previous session. Extended Stay America has gained 35.7% since the start of the year compared to the -0.2% move for the Zacks Consumer Discretionary sector and the 9.5% return for the Zacks Hotels and Motels industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 10, 2021, Extended Stay America reported EPS of $0.04 versus consensus estimate of $-0.01.

For the current fiscal year, Extended Stay America is expected to post earnings of $0.49 per share on $1.12 billion in revenues. This represents a 32.43% change in EPS on a 7.76% change in revenues. For the next fiscal year, the company is expected to earn $0.7 per share on $1.2 billion in revenues. This represents a year-over-year change of 43.88% and 7.27%, respectively.

Valuation Metrics

Extended Stay America may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

Extended Stay America has a Value Score of B. The stock's Growth and Momentum Scores are B and A, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 41.4X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 13.1X versus its peer group's average of 36X. Additionally, the stock has a PEG ratio of 2.1. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Extended Stay America currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Extended Stay America meets the list of requirements. Thus, it seems as though Extended Stay America shares could have a bit more room to run in the near term.

How Does Extended Stay America Stack Up to the Competition?

Shares of Extended Stay America have been rising, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also looking good, including Red Rock Resorts (RRR - Free Report) , Corsair Gaming (CRSR - Free Report) , and Boyd Gaming (BYD - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

However, it is worth noting that the Zacks Industry Rank for this group is in the bottom half of the ranking, so it isn't all good news for Extended Stay America. Still, the fundamentals for Extended Stay America are promising, and it still has potential despite being at a 52-week high.

In-Depth Zacks Research for the Tickers Above

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Boyd Gaming Corporation (BYD) - free report >>

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