ATOUR LIFESTYLE HOLDINGS-ADR (NASDAQ:ATAT) – A Strong Affordable Growth Pick with High Growth and Fair Valuation

Investors looking for growth opportunities at fair prices often consider the "Affordable Growth" strategy, which focuses on companies with strong growth potential but without high overvaluation. This method looks for stocks with a growth rating above 7, good profitability and financial health, and a valuation score above 5, ensuring the stock isn't too expensive compared to its fundamentals. By combining growth with reasonable pricing, this strategy helps find companies that can provide steady returns without the added risk of paying too much for future earnings.

Atour Lifestyle Holdings Ltd. (NASDAQ:ATAT) is a strong example under this approach. The company, which runs a variety of lifestyle hotels in China, has shown solid financial performance that matches the Affordable Growth criteria.

Growth Performance

ATAT’s growth is notable, with a 9/10 rating in the Growth category. Key points include:

• Revenue Growth: Over the past year, revenue increased by 43.38%, while the five-year average growth is 35.84%, much higher than industry standards.
• Earnings Growth: EPS rose 37.89% in the last year, with an impressive 138.03% average annual growth over five years.
• Future Outlook: Analysts expect continued growth, with EPS projected to rise 23.23% yearly and revenue forecast to increase 24.13% annually.

These numbers indicate that ATAT isn’t just benefiting from short-term trends but has built a business model that can maintain high growth.

Fair Valuation

Despite its strong growth, ATAT’s valuation is reasonable, scoring 5/10, meaning it isn’t overpriced relative to its potential. Key valuation measures include:

• P/E Ratio: At 25.14, it trades below the industry average (34.18) and is close to the S&P 500’s 26.54.
• Forward P/E: The forward P/E of 18.19 is lower than both the S&P 500 (35.28) and the industry (91.08), suggesting potential upside if growth continues.
• PEG Ratio: The PEG ratio, which factors in growth, points to a fair valuation, supporting the idea that the stock isn’t overvalued.

For growth investors, this mix of high growth and fair pricing lowers the risk of buying into an overpriced stock.

Profitability & Financial Strength

Beyond growth and valuation, ATAT performs well in profitability (8/10) and financial health (9/10), adding to its stability:

• High Margins: Gross margin is 84.19%, better than 96% of industry peers, while operating and net margins are also above average.
• Strong Returns: ROIC (22.51%) and ROE (38.30%) show efficient use of capital.
• Low Debt: A minimal debt-to-equity ratio (0.02) and a quick ratio (2.23) highlight a solid balance sheet with good liquidity.

These factors reduce risks, making ATAT a safer growth option compared to highly indebted or unprofitable competitors.

Why This Matches the Affordable Growth Strategy

The Affordable Growth strategy looks for stocks that offer growth without high valuation risks, a balance ATAT achieves. Its strong growth rates, fair valuation, and solid financials make it a good choice for investors seeking steady growth at a reasonable price.

For those interested in similar opportunities, the Affordable Growth Screen lists other stocks that meet these criteria.

Disclaimer: This analysis is for informational purposes only and does not constitute investment advice. Investors should conduct their own research or consult a financial advisor before making decisions.