PEB

We rate Pebblebrook Hotel Trust (PEB) as a Reduce with a composite score of 41.2/100 at a current price of $12.18. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in momentum (56th percentile) and value (38th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (25th percentile) and stability (27th percentile) tempers our overall conviction. We assign a No Moat rating (24/100), Very High uncertainty, and Poor capital allocation.

Key items to watch: the path to profitability. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Pebblebrook Hotel Trust holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 41.2/100 places it at rank #3388 in our full 7,333-stock universe. At $1.4B in market capitalization, Pebblebrook Hotel Trust is a small-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 0%, though momentum at the 56th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

Available margin data shows operating margins of 5%. Incomplete margin data limits our ability to fully assess the cost structure and margin trajectory, though the available metrics provide a partial view of operating efficiency.

At a current price of $12.18, Pebblebrook Hotel Trust is trading at a premium to fundamental value. Our value factor score of 38/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at EV/EBITDA of 44.9x (at a premium), P/B of 0.6x, P/S of 0.9x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a Very High uncertainty rating to Pebblebrook Hotel Trust. The stock exhibits multiple compounding risk factors: elevated market sensitivity (beta of 1.66), current negative profitability (net margin -0.6%), below-average price stability (27th percentile). The extreme uncertainty around future cash flows makes precise valuation difficult, and the range of outcomes is exceptionally wide. Only investors with high risk tolerance and extended time horizons should consider this name.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.66); current negative profitability (net margin -0.6%); below-average price stability (27th percentile); weak quality scores (30th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 27th percentile and quality factor at the 30th percentile provide a quantitative summary of the overall risk landscape.

We identify limited risk mitigants at this time, which contributes to our very high uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate Pebblebrook Hotel Trust's capital allocation as Poor. Key concerns include low returns on equity (0.0%), negative profitability, weak asset returns (ROA 0.0%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Pebblebrook Hotel Trust significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Pebblebrook Hotel Trust receives a Reduce rating with a composite score of 41.2/100 (rank #3388 of 7,333). Our quantitative framework assigns a No Moat (24/100, trend: stable), Very High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 35/100.

Our analysis does not support a constructive view on Pebblebrook Hotel Trust at this time. The combination of limited competitive advantages, very high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.