Is Chatham Lodging Trust overvalued or undervalued?

As of 6 August 2025, Chatham Lodging Trust's valuation grade has moved from very attractive to attractive, indicating a shift in perceived value. The company appears to be overvalued based on its current metrics, particularly with a P/E ratio of 23, which is higher than the peer average of approximately 20.11 for Gladstone Commercial Corp. and significantly higher than TPG RE Finance Trust's P/E of 11.75. Additionally, the EV to EBITDA ratio stands at 3.52, which is less favorable compared to TPG RE Finance Trust's 2.23, suggesting that Chatham may be less efficient in generating earnings relative to its enterprise value.
The dividend yield of 4.19% is appealing, yet it does not sufficiently offset the concerns raised by the low ROE of 2.00% and ROCE of 4.36%. Furthermore, Chatham's stock has underperformed against the S&P 500 across multiple time frames, with a year-to-date return of -20.34% compared to the S&P 500's 12.22%, reinforcing the notion that the stock may not be a compelling investment at its current valuation.