Choice Hotels (CHH) AI Stock Analysis

• Market Cap: $4.47B
• Dividend Yield: 1.32%
• Average Volume (3M): 621.33K
• Price to Earnings (P/E): 17.2
• Beta (1Y): 0.64
• Revenue Growth: 2.76%
• EPS Growth: 56.02%
• Country: US
• Employees: 1,695
• Sector: Consumer Cyclical
• Sector Strength: 84
• Industry: Travel Lodging
• EPS (TTM): 1.60
• Shares Outstanding: 45,971,394
• 10 Day Avg. Volume: 643,604
• 30 Day Avg. Volume: 621,325
• PEG Ratio: 0.42
• Price to Book (P/B): 24.21
• Price to Sales (P/S): 2.75
• P/FCF Ratio: 35.19
• Enterprise Value/Market Cap: 1.47
• Enterprise Value/Revenue: 4.13
• Enterprise Value/Gross Profit: 8.10
• Enterprise Value/Ebitda: 10.00
• 1Y Price Target: $105.71
• Price Target Upside: 8.61% Upside
• Rating Consensus: Hold
• Number of Analyst Covering: 8
• EPS Forecast (FY): 7.11
• Revenue Forecast (FY): $1.62B

• Rating: 67 Neutral
• Price Target: $105.00 ▲(7.88% Upside)
• Action: Reiterated Date: 02/20/26
• Date: Action: Reiterated 02/20/26

The score is held back primarily by balance-sheet leverage and historically thin/volatile equity despite strong profitability and positive free cash flow. Technicals are supportive and valuation is reasonable, while the latest call was constructive on strategy and liquidity but tempered by near-term RevPAR softness in 2026 guidance.

Positive Factors

Asset-light franchise model

An asset-light, franchise-focused model provides durable earnings leverage to system performance while minimizing capital intensity. Recurring royalty and fee streams tied to franchisee revenue create stable cash flow and scalability, supporting long-run margin resilience and faster returns on capital.

Consistent cash generation

Sustained positive operating cash flow and a sharp free cash flow rebound in 2025 indicate strong cash conversion. Reliable cash generation underpins liquidity, funds key-money/development flexibility, and supports disciplined capital allocation even through lodging cycles.

Conversion-led pipeline & international growth

Rapid international expansion and a conversion-focused pipeline diversify revenue and accelerate openings versus new build. Higher-revenue brand mix and fast conversions boost royalty per room and reduce development timelines, creating durable, accretive unit growth and margin upside.

Negative Factors

Elevated leverage

High absolute debt and an elevated debt-to-equity profile materially constrain financial flexibility. With equity thin and volatile, leverage amplifies downside risk if lodging demand softens, limiting room to absorb shocks or pursue large strategic investments without raising funding costs.

RevPAR cyclicality and recent weakness

Royalty-linked revenues are exposed to RevPAR volatility; guidance for flat-to-down RevPAR signals sensitivity to cyclical demand. Prolonged or deeper RevPAR weakness would directly compress royalty bases, margins and cash flow, challenging earnings durability across 2–6 months and beyond.

Higher key-money and unit-growth headwinds

Rising key-money outlays and selective exits increase near-term cash deployment and reduce low-quality rooms, slowing net unit growth. Higher upfront incentives raise payback periods on new/converted rooms and can pressure near-term royalty growth despite a higher-quality pipeline.

Choice Hotels Business Overview & Revenue Model

Company Description

Choice Hotels International, Inc., together with its subsidiaries, operates as a hotel franchisor worldwide. The company operates in Hotel Franchising and Corporate & Other segments. It franchises lodging properties under the brand names of Comfort Inn, Comfort Suites, Quality, Clarion, Clarion Pointe, Sleep Inn, Econo Lodge, Rodeway Inn, MainStay Suites, Suburban Extended Stay Hotel, WoodSpring Suites, Everhome Suites, Cambria Hotels, and Ascend Hotel Collection. The company also develops and markets cloud-based property management software to non-franchised hoteliers. As of March 31, 2022, it had approximately 7,000 hotels with approximately 600,000 rooms in 35 countries and territories. Choice Hotels International, Inc. was founded in 1939 and is headquartered in Rockville, Maryland.

How the Company Makes Money

Choice Hotels primarily makes money through an asset-light, franchise-focused model where most properties are owned and operated by independent hotel owners (franchisees) rather than by Choice. The company’s key revenue streams generally include: (1) Franchise royalties and related fees: recurring fees paid by franchisees for the right to operate under Choice brands, typically tied to a hotel’s room revenue; this is usually the largest and most stable revenue source. (2) Marketing, reservation, and system/technology fees: franchisees pay into programs and platforms that drive demand and enable bookings (e.g., central reservation systems, brand.com channels, loyalty program, and other distribution/technology services). These fees support and monetize Choice’s scale in marketing and distribution. (3) Initial and ongoing franchise/licensing fees: one-time or periodic fees associated with signing new franchise agreements, renewals, or conversions (when an existing hotel switches to a Choice brand). (4) Ancillary and other services: additional revenues can come from providing optional services to franchisees and from other business activities reported by the company (specific subcategories may vary by period). Earnings are influenced by the number of franchised hotels/rooms, hotel operating performance (which affects royalty bases), brand mix, franchise retention and unit growth, and the effectiveness of Choice’s distribution/loyalty platform in generating booking volume for franchisees.

Choice Hotels Financial Statement Overview

Summary

Strong profitability and improving 2025 margins plus consistently positive free cash flow support the score, but balance-sheet risk is a major constraint: debt has risen to ~$2.0B and equity has been thin/volatile (debt-to-equity ~11x in 2025), reducing flexibility if lodging demand weakens.

Income Statement

Revenue has grown from $774M (2020) to $1.597B (2025), but growth has clearly moderated recently (about 2–3% in 2024–2025 vs. double-digit gains in 2022–2023). Profitability is a key strength: net margin remains strong (about 23% in 2025), improving versus 2023–2024, and gross margin expanded meaningfully in 2025. A watch item is that operating profitability appears more volatile across years (with 2025 operating margin not provided while prior years were solid), suggesting earnings quality should be monitored even though bottom-line results are strong.

Balance Sheet

Leverage is the main weakness. Total debt increased to ~$2.01B in 2025 (from ~$1.11B in 2021), and the debt-to-equity profile is aggressive and unstable due to very low/negative equity in some years (equity was negative in 2024 and near-zero in 2023). While equity improved to ~$181M in 2025, the debt-to-equity ratio remains elevated (~11x), leaving less balance-sheet flexibility if the lodging cycle softens. Returns on equity are distorted by the small equity base (very high in 2025 and negative in 2024), reinforcing that leverage is driving much of the equity math.

Cash Flow

Cash generation is generally solid, with operating cash flow consistently positive and free cash flow positive each year. Free cash flow rebounded sharply in 2025 to ~$270M (up strongly vs. 2024), and 2025 free cash flow matched reported net income (a supportive signal for earnings cash conversion that year). However, cash flow coverage of debt is only moderate (operating cash flow running at roughly 31%–84% of total debt historically, and ~58% in 2025), and free cash flow has been somewhat uneven (declines in 2022–2024 before the 2025 rebound).

Breakdown	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	1.60B	1.58B	1.54B	1.40B	1.07B
Gross Profit	980.59M	744.17M	690.28M	700.05M	599.60M
EBITDA	659.27M	553.64M	440.39M	544.52M	473.67M
Net Income	369.95M	299.67M	258.51M	332.15M	288.96M
Balance Sheet
Total Assets	2.92B	2.53B	2.39B	2.10B	1.93B
Cash, Cash Equivalents and Short-Term Investments	45.00M	40.18M	26.75M	41.57M	511.61M
Total Debt	2.13B	1.89B	1.68B	1.29B	1.11B
Total Liabilities	2.74B	2.58B	2.36B	1.95B	1.67B
Stockholders Equity	181.23M	-45.27M	35.60M	154.66M	265.88M
Cash Flow
Free Cash Flow	124.65M	173.55M	178.26M	277.11M	305.83M
Operating Cash Flow	270.45M	319.40M	296.55M	367.06M	383.70M
Investing Cash Flow	-218.26M	-84.57M	-265.63M	-442.43M	-78.93M
Financing Cash Flow	-50.10M	-221.71M	-45.94M	-394.15M	-27.72M

Choice Hotels Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 97.33
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For CHH, the sentiment is Negative. The current price of 97.33 is below the 20-day moving average (MA) of 102.79, below the 50-day MA of 104.91, and below the 200-day MA of 108.95, indicating a bearish trend. The MACD of -2.46 indicates Positive momentum. The RSI at 40.49 is Neutral, neither overbought nor oversold. The STOCH value of 31.94 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for CHH.

Choice Hotels Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
HTHT	74 Outperform	$16.11B	14.58	33.88%	3.60%	5.70%	9.53%
ATAT	72 Outperform	$5.04B	19.56	44.47%	1.76%	36.17%	25.41%
IHG	71 Outperform	$19.82B	28.95	-23.50%	1.21%	8.89%	23.20%
H	68 Neutral	$13.74B	-294.43	-1.50%	0.36%	2.61%	-106.74%
CHH	67 Neutral	$4.47B	17.22	614.45%	1.32%	2.76%	56.02%
Sector *	61 Neutral	$18.38B	12.79	-2.54%	3.03%	1.52%	-15.83%
WH	61 Neutral	$5.90B	-23.83	35.09%	2.13%	3.38%	38.04%

Choice Hotels Corporate Events

Choice Hotels Announces Retirement of Senior Legal Executive

On February 20, 2026, Choice Hotels International, Inc. announced that Simone Wu, its Senior Vice President, General Counsel, Corporate Secretary and head of External Affairs, plans to retire from her role in the first half of 2026. She will remain in her current position until a successor is appointed and will support an orderly leadership transition.

In connection with her upcoming departure, the company said Wu will receive benefits under its existing compensation and benefits plans and a long-standing severance and non-competition agreement first executed in 2012 and subsequently amended. The planned transition underscores continuity in Choice Hotels’ legal and governance functions while it prepares to bring in a new top legal and corporate affairs executive.

The most recent analyst rating on (CHH) stock is a Buy with a $123.00 price target. To see the full list of analyst forecasts on Choice Hotels stock, see the CHH Stock Forecast page.

Choice Hotels standardizes and updates executive severance framework

On December 31, 2025, Choice Hotels International, Inc. updated its executive non-competition, non-solicitation and severance framework by entering into a new Non-Competition, Non-Solicitation and Severance Benefit Agreement with Chief Segment and International Operations Officer Raul Ramirez and designating this revised 2025 agreement as the template for future executive officers, subject to board committee approval. The 2025 agreement shifts severance to single lump-sum payments, refines key definitions such as change in control and good reason, adds cooperation requirements, clarifies tax withholding, reinforces employees’ rights to communicate with government agencies and protections under labor and trade secrets laws, and includes more detailed provisions to address Section 409A of the Internal Revenue Code. On the same date, Choice amended existing severance agreements with executives Dominic Dragisich, David Pepper, Scott Oaksmith and Simone Wu to align severance timing, tax withholding and protected-rights language with Section 409A and the updated 2025 template, signaling a broader standardization and compliance-focused tightening of its executive compensation and post-employment protections framework.

The most recent analyst rating on (CHH) stock is a Sell with a $99.00 price target. To see the full list of analyst forecasts on Choice Hotels stock, see the CHH Stock Forecast page.