Hyatt’s (H) total debt increased from $1.6 billion at the end of 2016 to $1.7 billion at the end of 1Q17. Its debt remained constant at $1.7 billion at the end of 2Q17.
Hyatt’s debt has fluctuated from $1.3 billion to $1.7 billion for the past five years, thanks to its routine acquisitions and subsequent repayment of debt. In 1Q17, it acquired Cranwell Resort, Miravak Resort, and Travaasa Resort.
The leverage ratio is calculated by dividing net debt (total debt minus cash) by EBITDA.[1. earnings before interest, tax, depreciation, and amortization] Hyatt’s leverage ratio increased to 6.5x at the end of 1Q17 from 6.1x at the end of 2016.
This ratio remained constant at 6.5x at the end of 2Q17. At the end of 2015, its leverage ratio was even lower at 5.4x, primarily due to Hyatt’s debt reduction.
Despite this increase in leverage, Hyatt seems to be faring better than its peers. Marriott (MAR) had a net debt-to-EBITDA ratio of 10.7x at the end of 2Q17, followed by Hilton Worldwide (HLT) with a 12.8x net debt-to-EBITDA ratio. Wyndham Worldwide (WYN) has the highest net debt-to-EBITDA ratio of 15.7x.
Hyatt (H) generated $319.0 million in cash flow from operations (or CFO) in the first half of 2017, of which $186.0 million translated into free cash flow. Hyatt’s CFO totaled $489.0 million in 2016, of which $278.0 million translated to free cash flow.
This cash flow gives Hyatt the ability to repay debt. In 2Q17, Hyatt repaid $292.0 million of its long-term debt.
Based on the metrics discussed in this article, Hyatt’s debt seems to be at manageable levels. Investors can gain exposure to Hyatt by investing in the First Trust Small Cap Value AlphaDEX ETF (FYT), which holds 0.38% of its portfolio in the company.