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Why GreenTree Hospitality Stock Tanked 16% on Thursday

By Brett Schafer – Jan 13, 2022 at 12:30PM

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The Chinese hotel operator reported disappointing earnings results.

What happened

Shares of GreenTree Hospitality Group (GHG -0.67%) were down as much as 16% during Thursday trading. The Chinese hotel operator reported its earnings after the close yesterday, posting a disappointing earnings per share (EPS) number. As of 11:42 a.m. EST, the stock is down 9.8% on the day.

So what

On Jan. 12, GreenTree Hospitality released its earnings for the third quarter of 2021. EPS came in at $0.49 for the period, missing the consensus estimates of $1.21 by a wide margin. Given how much importance many investors place on an EPS number, this big miss is likely why GreenTree Hospitality stock is down so much on Thursday.

A couple walking down a hotel hallway.

Image source: Getty Images.

Outside of EPS, GreenTree's financial and operating metrics seem to be doing fine. Revenue was up 16.3% year over year in the period, hitting $48.2 million. It also opened 182 new hotels in the quarter, growing its total to 4,626 hotels in operation. The company's loyalty program hit 66 million members, up from 62 million in Q2 of 2021.

Now what

After today's fall, GreenTree Hospitality stock is down over 25% in the last six months. Many Chinese stocks have had difficulties over the last year, with major technology companies like Alibaba and Tencent Holdings falling sharply due to a regulatory crackdown. If you understand GreenTree's business and think it can grow its earnings, cash flow, and top line over the next few years and beyond, then now may be the time to scoop up some shares trading at a discount. But if it's an unknown to you, there's no reason to buy the stock just because the price is lower. 

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool owns and recommends Tencent Holdings. The Motley Fool has a disclosure policy.

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