CHOICE HOTELS INTERNATIONAL INC /DE

Where It Passes

Where It Falls Short

• Debt & Leverage8% pass✓ 1✗ 14▾

  11 of 12 flag CHH's debt & leverage — Graham, Buffett, Lynch +8 more

  LT Debt vs Net Current AssetsLT Debt $2.2B vs NCA $118.4M

  ✗GrahamLT Debt <= Net Current Assets

  Debt/Equity & Interest CoverageD/E: 16.52, IC: 3.8x

  ✗BuffettD/E < 0.5 AND Interest Coverage > 5x

  Total Debt / Equity16.52

  ✗Lynch< 0.33

  Cash - Long-term Debt$-2.0B

  ✗LynchPositive preferred

  LT Debt / Total Assets Change69.89% -> 65.32%

  ✓PiotroskiDecreased YoY

  Current Assets / Current Liabilities1.26

  ✗Dreman> 1.5✗SchlossCurrent ratio >= 1.50x (app cutoff)

  Total Debt / Shareholders' Equity16.52

  ✗Dreman< 0.8✗Templeton< 1.0 (fixed cap; proxy for below-sector-median leverage)✗SchlossD/E < 1.00x

  Debt Levels16.52

  ✗MungerDebt/Equity < 0.5✗AkreDebt/Equity < 0.3

  Interest Coverage & Debt/EBITDAIC=3.8x, D/EBITDA=5.0x

  ✗MarksInterest Coverage > 3x; Debt/EBITDA < 4x

  Total Debt / Shareholders Equity16.52

  ✗Ackman<= 1.0

  Negative debt-to-equity (higher means less debt)-16.5235; #4171/4210 (top 99.1%)

  ✗AsnessTop 30% of eligible cross-section
• Valuation models13% pass✓ 1✗ 7▾

  Models split on CHH at $118.78 — fair values range $26.46–$197.50

  Graham fair value$26.46

  ✗Graham-348.9% margin vs $118.78

  Lynch fair value$197.50

  ✓Lynch+39.9% margin vs $118.78

  Greenblatt fair value$73.69

  ✗Greenblatt-61.2% margin vs $118.78

  Dreman fair value$95.85

  ✗Dreman-23.9% margin vs $118.78

  Pabrai fair value$107.94

  ✗Pabrai-10.0% margin vs $118.78

  Akre fair value$42.44

  ✗Akre-179.9% margin vs $118.78

  Marks fair value$71.44

  ✗Marks-66.3% margin vs $118.78

  Templeton fair value$86.29

  ✗Templeton-37.7% margin vs $118.78
• Valuation15% pass✓ 3✗ 25▾

  11 of 13 flag CHH's valuation — Graham, Greenblatt, Dreman +8 more

  Price / 3-yr avg EPS18.6x

  ✗Graham<= 15x

  Price-to-Book Ratio30.1x

  ✗Graham<= 1.5x

  P/E x P/B560.40

  ✗Graham<= 22.5

  Basic earnings-growth PEG (dividends excluded)0.35

  ✓Lynch< 1.0 (ideally < 0.5)

  EBIT / Enterprise Value5.1%

  ✗Greenblatt> 10%

  Earnings Yield + ROC AssessmentEY=5.1%, ROC=62.8%

  ✗GreenblattBoth EY > 10% and ROC > 25%

  Price / EPS15.0x

  ✗Dreman< 12x✗Templeton< 12x (fixed ceiling; proxy for the market's cheapest 40%)

  Price / (CFO / Shares)20.2x

  ✗Dreman< 8x

  Price / Book Value per Share30.1x

  ✗Dreman< 1.2x✗Templeton< 1.5x✗SchlossP/B <= 0.80x (app cutoff)

  Valuation ReasonablenessP/E=15.0x, OE Yield=7.9%

  ✓MungerP/E < 25 or Owner Earnings Yield > 5%

  P/E or FCF YieldP/E=15.0x

  ✗PabraiP/E < 15 or FCF Yield > 10%

  P/B or P/E vs. Historical AverageP/E=15.0x, P/B=30.1x

  ✗MarksP/E < 15 or P/B < 2.0

  Discount to Intrinsic Value-23.9% (IV=$95.85 vs Price=$118.78)

  ✗Marks>= 20% below intrinsic value

  Price / FCF per Share

  ✗Ackman<= 25

  Price vs. Trailing Low130% of trailing low ($91.26)

  ✗Templeton<= 120% of trailing low (certified split-adjusted live window)

  Net income / market capitalization+3.90%; #2057/6340 (top 32.4%)

  ✗AsnessTop 30% of eligible cross-section✗OshaughnessyTop 10% of eligible cross-section

  Positive book equity / market capitalization+0.0249; #5113/6449 (top 79.3%)

  ✗AsnessTop 30% of eligible cross-section

  Price / Diluted EPS15.0x

  ✗NeffP/E <= 15x (app proxy for a P/E 40%-60% below the market)

  (EPS CAGR % + Dividend Yield %) / P/E2.88

  ✓Neff> 0.7 (Neff's published traditional edge)

  Price / Tangible Book Value per ShareN/A (non-positive TBVPS)

  ✗SchlossP/TBV <= 1.00x (app cutoff)

  Book Value per Share Change

  ✗SchlossLatest BVPS >= earliest BVPS over >= 3 years (app rule)

  Revenue / market capitalization+0.3083; #3285/5247 (top 62.6%)

  ✗OshaughnessyTop 10% of eligible cross-section

  (Operating cash flow - capex) / market capitalization

  ✗OshaughnessyTop 10% of eligible cross-section

  Trailing six-month price return through the evaluation date+5.99%; #2089/6202 (top 33.7%)

  ✗OshaughnessyTop 10% of eligible cross-section
• Efficiency38% pass✓ 6✗ 5▾

  5 of 8 flag CHH's efficiency — Graham, Piotroski, Dreman +2 more

  Current Ratio1.26

  ✗Graham>= 2.0

  ROIC (3-5 yr avg)25.6%

  ✓Buffett> 10%

  ROIC - WACC+15.6%

  ✓BuffettPositive (WACC = 10%)

  EBIT / (NWC + Net Fixed Assets)62.8%

  ✓Greenblatt> 25%

  Current Ratio Change YoY0.73 -> 0.87

  ✓PiotroskiIncreased YoY

  Revenue / Total Assets Change YoY0.63x -> 0.55x

  ✗PiotroskiImproved YoY

  Current Assets / Current Liabilities1.26

  ✗Dreman> 1.5

  Return on Invested Capital12.7%

  ✗Munger> 15%

  ROIC (high and growing)FY2023: ROIC=18.5%; FY2024: ROIC=21.3%; FY2025: ROIC=17.0%

  ✓AkreLatest 3 consecutive FYs: ROIC > 15% in each

  Reinvestment Rate x ROIC9.5% (RR=74% x ROIC=12.7%)

  ✗AkreReinvestment Rate * ROIC > 10%

  ROIC (5-year)5/5 years above 12% (latest 17.0%)

  ✓SleepROIC > 12% in a majority of years
• Cash Flow40% pass✓ 5✗ 7▾

  6 of 10 flag CHH's cash flow — Piotroski, Dreman, Pabrai +3 more

  Free Cash Flow Proxy$207.5M

  ✓BuffettPositive and growing

  FCF Positive and Growing$213.2M

  ✓LynchPositive and growing

  Operating Cash Flow$270.4M

  ✓PiotroskiCFO > 0

  (CFO / Total Assets) vs ROACFO/Assets=9.27%, ROA=12.68%

  ✗PiotroskiCFO/Assets > ROA

  Price / (CFO / Shares)20.2x

  ✗Dreman< 8x

  P/E or FCF YieldP/E=15.0x

  ✗PabraiP/E < 15 or FCF Yield > 10%

  FCF Positive18/18 years FCF positive

  ✓MarksPositive FCF in majority of recent years

  (OCF - CapEx) / Market Cap

  ✗Ackman>= 4%

  Price / FCF per Share

  ✗Ackman<= 25

  Positive Operating Cash Flow frequency26/26 years positive

  ✓SleepPositive OCF in >= 70% of available years

  Operating Cash Flow - Capital Expenditures

  ✗Neff> $0 (app proxy for a strong fundamental case)

  (Operating cash flow - capex) / market capitalization

  ✗OshaughnessyTop 10% of eligible cross-section
• Profitability44% pass✓ 21✗ 14▾

  9 of 16 flag CHH's profitability — Graham, Buffett, Greenblatt +6 more

  Positive EPS (10 years)26/28 years positive

  ✗GrahamPositive EPS every year for 10 years

  EPS Growth (3-yr avg, 10-yr window)

  ✗Graham>= 33% growth

  Net Income Positive (10+ years)28/28 years positive

  ✓BuffettPositive every year for 10+ years

  ROE (up to 5-year arithmetic mean)313.4%

  ✓Buffett> 15% arithmetic mean (app rule)

  Operating Margin (10-yr trend)28.1% (latest)

  ✓BuffettStable or rising over 10 years

  Free Cash Flow Proxy$207.5M

  ✓BuffettPositive and growing

  Earnings Variance (10-yr CoV)

  ✗BuffettCoV < 0.3

  Retained Earnings Effectiveness

  ✗Buffett$1 retained -> > $1 market value created

  Basic earnings-growth PEG (dividends excluded)0.35

  ✓Lynch< 1.0 (ideally < 0.5)

  3-5 Year EPS CAGR42.4%

  ✓Lynch15-30% (Fast Grower); > 0% to pass

  ROE156.5%

  ✓Lynch> 15%

  EBIT / Enterprise Value5.1%

  ✗Greenblatt> 10%

  Earnings Yield + ROC AssessmentEY=5.1%, ROC=62.8%

  ✗GreenblattBoth EY > 10% and ROC > 25%

  Net Income / Total Assets12.68%

  ✓PiotroskiROA > 0

  ROA Change YoY11.84% -> 12.68% (delta: +0.84%)

  ✓PiotroskiCurrent ROA > Prior ROA

  (CFO / Total Assets) vs ROACFO/Assets=9.27%, ROA=12.68%

  ✗PiotroskiCFO/Assets > ROA

  Gross Margin Change YoY

  ✗PiotroskiImproved YoY

  Pre-Tax Income / Revenue16.5%

  ✓Dreman>= 8%

  Net Income / Shareholders' Equity156.5%

  ✓Dreman> 12%

  Margin of SafetyP/E=15.0x, P/B=30.1x

  ✗PabraiP/B < 1.5 or P/E < 15

  Return on Equity381.7% (3-yr avg)

  ✓AkreROE > 20% (3-year avg)

  Discount to Intrinsic Value-23.9% (IV=$95.85 vs Price=$118.78)

  ✗Marks>= 20% below intrinsic value

  Positive Net Income Frequency28/28 years positive

  ✓MarksPositive net income in >= 7 of last 10 years

  Operating Income / Revenue22.8%

  ✓Ackman>= 15%

  Net Income / Shareholders Equity156.5%

  ✓Ackman>= 15%

  5-Year EPS CAGR42.4% CAGR over 5 years

  ✓Templeton> 0% (5-year EPS CAGR)

  Operating Margin Trend24.3% (2023) -> 28.1% (2025)

  ✓TempletonNon-negative operating-margin trend over 3 years

  Revenue growth vs. gross and operating margin trendrevenue up, operating margin 24.3% -> 28.1%

  ✓SleepRevenue rising; gross margin flat or falling; operating margin holding

  Net income / market capitalization+3.90%; #2057/6340 (top 32.4%)

  ✗AsnessTop 30% of eligible cross-section✗OshaughnessyTop 10% of eligible cross-section

  Gross profit / total assets

  ✗AsnessTop 30% of eligible cross-section

  Net income / positive book equity+156.53%; #41/5226 (top 0.8%)

  ✓AsnessTop 30% of eligible cross-section

  Negative 5-year standard deviation of ROA-0.0188; #1376/5884 (top 23.4%)

  ✓AsnessTop 30% of eligible cross-section

  3-5 Year Diluted EPS CAGR42.4% over 5 years

  ✗Neff7%-20% annualized

  Positive Diluted-EPS Years8/8 years positive

  ✓Schloss>= 70% positive over 5-10 observed years (app rule)
• Verdicts46% pass✓ 6✗ 7▾

  Split decision: 7 FAIL · 4 NEUTRAL · 3 PASS · 2 BUY

  Overall verdict

  ✗GrahamFAIL (2/9)•BuffettNEUTRAL (6/9)✓LynchBUY (5/7)✓GreenblattRank #614•PiotroskiNEUTRAL (F-Score 6)✗DremanFAIL (3/11)✓MungerPASS (2/4)✗PabraiFAIL (1/3)✗AkreFAIL (2/6)✗MarksFAIL (2/5)✓AckmanPASS (5/9)✓TempletonPASS (4/8)✓SleepBUY (5/6)•AsnessNEUTRAL (Not ranked)✗NeffFAIL (3/6)✗SchlossFAIL (2/7)•OshaughnessyNEUTRAL (Not ranked)
• Growth50% pass✓ 8✗ 5▾

  4 of 8 pass — Graham, Dreman, Ackman +1 more object

  EPS Growth (3-yr avg, 10-yr window)

  ✗Graham>= 33% growth

  Basic earnings-growth PEG (dividends excluded)0.35

  ✓Lynch< 1.0 (ideally < 0.5)

  3-5 Year EPS CAGR42.4%

  ✓Lynch15-30% (Fast Grower); > 0% to pass

  Inventory Growth vs Revenue GrowthN/A (no inventory)

  ✓LynchInventory growth < Revenue growth

  EPS Growth Direction

  ✗DremanPositive over recent years

  EPS CAGR

  ✗Dreman> 5% annualized

  Positive Net Income Frequency28/28 years positive

  ✓MarksPositive net income in >= 7 of last 10 years

  3yr Median Revenue Growth2.6%

  ✗Ackman>= 5%

  Positive EPS Growth Frequency4/5 years with positive EPS growth

  ✓AckmanPositive EPS growth in >= 3 of last 5 years

  5-Year EPS CAGR42.4% CAGR over 5 years

  ✓Templeton> 0% (5-year EPS CAGR)

  Revenue growth vs. gross and operating margin trendrevenue up, operating margin 24.3% -> 28.1%

  ✓SleepRevenue rising; gross margin flat or falling; operating margin holding

  5-year Revenue CAGR15.6%

  ✓SleepCAGR > 7%

  3-5 Year Diluted EPS CAGR42.4% over 5 years

  ✗Neff7%-20% annualized