2 Undervalued Hotel Stocks Trading Below Fair Value
- August 27, 2026
- Posted by: Kunal Singla
- Category: Market
Hotel sector PE near 37.7. EIH Ltd trades at 25.6x. Lemon Tree Hotels at 28.9x. Both post positive ROE.
Quick Answer
Two hotel stocks, EIH Ltd and Lemon Tree Hotels, are trading below the sector’s average price to earnings ratio of close to 37.7 times while both post positive return on equity. EIH Ltd operates the luxury Oberoi and Trident brands with a near debt free balance sheet, while Lemon Tree Hotels runs a large upper mid scale and economy portfolio with higher leverage. This gap between valuation and profitability is why these hotel stocks stand out on a simple sector screen, though a formal buy rating needs deeper company specific research.
India’s hotel industry has benefited from a strong recovery in both business and leisure travel, pushing average room rates and occupancy levels higher across most segments. Not every stock in the space carries the same multiple. A screen of listed hotel stocks against the sector’s average price to earnings ratio surfaces two names still priced below that benchmark.
EIH Ltd and Lemon Tree Hotels both currently trade below the broader hotel industry PE, despite posting positive return on equity. This piece breaks down why each stock screens as undervalued, what the underlying financials show, and the risks that come with owning hotel operators.
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Why These Hotel Stocks Screen as Undervalued
The hotel industry currently carries an average price to earnings ratio of close to 37.7 times trailing earnings for companies in this hospitality classification. A stock trading meaningfully below that average, while still posting positive return on equity, is a reasonable starting point for a relative valuation screen.
Both companies below clear that bar, though they sit at very different points on the price spectrum, a reminder that hotel stocks span luxury and mid market positioning alike.
The table below lists these two companies alongside their current price, valuation multiple and return ratios.
| Company | NSE Ticker | CMP (Rs) | PE Ratio | Sector PE | ROE | Market Cap (Rs Cr) |
|---|---|---|---|---|---|---|
| EIH Ltd | EIHOTEL | 302.15 | 25.62 | 37.68 | 13.68% | 18,967 |
| Lemon Tree Hotels | LEMONTREE | 108.05 | 28.92 | 37.68 | 16.32% | 8,616 |
EIH Ltd: Luxury Positioning, Near Debt Free
EIH Ltd operates the Oberoi and Trident hotel brands, positioned at the luxury and upper upscale end of the Indian hospitality market. The stock trades at a price to earnings ratio of 25.62, well below the sector average of 37.68, at a current price of around Rs 302.
Return on equity of 13.68 percent is supported by a debt to equity ratio of just 0.05. On an EPS of Rs 11.84 and book value of Rs 84.15, the price to book multiple works out to 3.60, alongside a dividend yield of 0.49 percent.
Lemon Tree Hotels: Higher ROE, Higher Leverage
Lemon Tree Hotels operates a large portfolio of upper mid scale and economy hotels across India under multiple brand tiers. Its price to earnings ratio of 28.92 sits below the sector average of 37.68, at a current share price of around Rs 108.
Return on equity of 16.32 percent is higher than EIH Ltd, though the debt to equity ratio of 1.44 is meaningfully greater, reflecting the capital intensity of its expansion strategy. On an EPS of Rs 3.76 and book value of Rs 17.57, the price to book multiple works out to 6.19, the higher of the two hotel stocks in this list.
Valuation Snapshot: PE, PB and Dividend Yield
Beyond the headline price to earnings ratio, book value multiples and dividend yield highlight the different capital structures of these two companies. Lemon Tree Hotels trades at a richer price to book multiple despite carrying more leverage, reflecting its higher return on equity.
| Company | Price to Book | Book Value (Rs) | Dividend Yield | Debt to Equity |
|---|---|---|---|---|
| EIH Ltd | 3.60 | 84.15 | 0.49% | 0.05 |
| Lemon Tree Hotels | 6.19 | 17.57 | 0.00% | 1.44 |
EIH Ltd carries almost no debt and pays a small dividend, consistent with a mature luxury operator, while Lemon Tree Hotels reinvests earnings into continued room inventory growth and currently pays no dividend.
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Risks to Consider Before Buying These Hotel Stocks
A discount to the sector average price to earnings ratio does not remove company specific risk for hotel stocks tied to travel demand cycles.
Travel Demand Cyclicality
Hotel occupancy and average room rates are closely tied to broader economic activity and travel sentiment, making revenue sensitive to slowdowns in both business and leisure travel.
Leverage and Interest Rate Sensitivity for Lemon Tree Hotels
Lemon Tree Hotels’ higher debt to equity ratio makes its earnings more sensitive to interest rate movements and refinancing conditions than lower leverage peers such as EIH Ltd.
Input and Operating Cost Inflation
Rising costs for food, energy and staffing can compress hotel margins even when occupancy and room rates remain healthy.
Geographic and Event Driven Concentration
Performance at individual properties can be affected by local events, seasonality and regional travel disruptions, adding variability to quarterly results.
How to Track These Hotel Stocks
Investors evaluating these two names should track quarterly average room rates, occupancy levels, and how the sector average PE moves relative to each company’s own multiple over time, rather than relying on the valuation gap in isolation among hotel stocks. Comparing these numbers regularly is the most reliable way to judge whether the discount to fair value remains intact or has already closed.
Download the Univest iOS App or Univest Android App to track EIH Ltd and Lemon Tree Hotels share prices live and set price alerts.
Conclusion
EIH Ltd and Lemon Tree Hotels are the two hotel stocks currently trading below the sector’s average price to earnings ratio of close to 37.7 times, while both maintain positive return on equity. That combination makes them worth a closer look for investors who already want exposure to India’s travel and hospitality theme, though travel demand cyclicality and leverage differences mean position sizing and diversification still matter when adding these names to a portfolio.
Disclaimer: Data and figures in this article are sourced from publicly available information. These may or may not be accurate. Please verify all data with the official NSE (nseindia.com) and BSE (bseindia.com) websites before making any investment decision. Investments in securities are subject to market risk. This content is for educational purposes only and is not investment advice by Univest (SEBI RA INH000013776).
FAQs on Undervalued Hotel Stocks
Which hotel stocks are trading below the sector average PE?
Ans. EIH Ltd and Lemon Tree Hotels are currently trading below the hotel sector’s average price to earnings ratio of close to 37.7 times, based on live NSE and BSE pricing.
Is EIH Ltd undervalued compared to its sector?
Ans. EIH Ltd trades at a price to earnings ratio of 25.62, well below the sector average of 37.68, while delivering a return on equity of 13.68 percent from its luxury Oberoi and Trident hotel brands.
Why does Lemon Tree Hotels carry more debt than EIH Ltd?
Ans. Lemon Tree Hotels runs a debt to equity ratio of 1.44 to fund continued expansion of its upper mid scale and economy hotel portfolio, compared with EIH Ltd’s near debt free ratio of 0.05.
What is the market capitalisation of Lemon Tree Hotels?
Ans. Lemon Tree Hotels has a market capitalisation of around Rs 8,616 crore, with a price to earnings ratio of 28.92 against the sector average of 37.68.
Which of these hotel stocks has the higher return on equity?
Ans. Lemon Tree Hotels has a higher return on equity of 16.32 percent compared with EIH Ltd’s 13.68 percent, though it also carries meaningfully more leverage.
What are the main risks in undervalued hotel stocks?
Ans. The main risks include cyclicality in travel demand, interest rate sensitivity for more leveraged operators, rising input and staffing costs, and geographic or event driven concentration at individual properties.
Is a low PE enough reason to buy a hotel stock?
Ans. A price to earnings ratio below the sector average is a useful starting screen for hotel stocks but not a standalone buy signal. Investors should also review occupancy trends, room rate growth and balance sheet strength before investing.
