Unlocking Value in Hospitality and Lifestyle: A Cash Flow-Driven Analysis of Atour, KE, and Comfort Systems

The hospitality and lifestyle sector has long been a battleground for value hunters, but in 2025, the focus has shifted to companies that combine robust cash flow generation with scalable growth. As investors seek undervalued opportunities, three names stand out: Atour Lifestyle Holdings, KE Holdings, and Comfort Systems USA. By dissecting their cash flow dynamics and growth trajectories, we can identify which stocks offer the most compelling risk-reward profiles.

Atour Lifestyle Holdings: A Model of Operational Efficiency

Atour Lifestyle Holdings (ATAT) has emerged as a standout in the hotel and retail space, driven by disciplined expansion and strong pricing power. In Q3 2025, the company reported a 38.4% year-over-year revenue increase to RMB2.63 billion, with manachised hotel revenue up 32.3% and retail sales surging 76.4%. This diversification into retail-leveraging its brand equity-has proven to be a lucrative tailwind.

Adjusted EBITDA grew 28.7% to RMB685 million, translating to a 26.1% margin, while RevPAR hit RMB371, supported by an 80.2% occupancy rate. These metrics underscore Atour's ability to monetize its 1,948 hotels and 219,359 rooms, which expanded 27.1% and 25.2% year-over-year, respectively.

However, cash flow caution is warranted. While Atour's five-year free cash flow (FCF) growth averaged 81%, 2024 FCF contracted 14% year-over-year to RMB1.7 billion. This dip, though, may reflect strategic reinvestment in its retail arm rather than operational distress. For investors, the key is whether Atour can sustain its EBITDA margins amid rising competition in the mid-scale hotel segment.

KE Holdings: A Tale of Contradictions

KE Holdings (BEKE) presents a more complex picture. The company's Q3 2025 results showed a 2.1% revenue increase to RMB23.1 billion, driven by a 45.3% surge in home rental services. Yet net income plummeted 36.1% to RMB747 million, and operating cash flow turned negative at-$3.3 billion-a 226% decline from Q1 2025. This disconnect between top-line growth and profitability raises red flags.

The root cause? A 6.7% drop in gross margin to 20.7% year-over-year, driven by higher fixed compensation costs and a shift in revenue mix. Meanwhile, KE's Q4 2024 performance was more encouraging: a 54.1% revenue spike to RMB31.1 billion and a 55.5% jump in GTV to RMB1.14 trillion. Share repurchases and dividends-$675 million in buybacks and $400 million in dividends in 2024-signal management's confidence in long-term value.

The challenge for KE is balancing aggressive expansion with margin preservation. Its 28.6% year-over-year store and agent growth (to 56,849 stores and 550,290 agents) is impressive, but declining mobile MAUs (44.5 million in Q1 2025) suggest user engagement struggles. Investors must weigh the company's AI-driven innovation against its cash flow volatility.

Comfort Systems USA: Cash Flow Powerhouse with a Growing Backlog

Comfort Systems USA (CSU) is the sector's most compelling cash flow story. In Q3 2025, operating cash flow soared to $553.3 million, a 83% increase from $302.2 million in 2024. This surge was fueled by a $9.38 billion backlog as of September 30, 2025-up from $5.68 billion a year earlier.

The company's ability to convert backlog into cash is a critical differentiator. With a 23.4% EBITDA margin and a 14.7% free cash flow yield, Comfort Systems is generating capital at a rate that outpaces peers. Management's focus on project execution and backlog management-highlighted in its recent earnings call-suggests this momentum is sustainable.

Yet, Comfort Systems' valuation remains anchored to its industrial services model. While its 10.3% revenue growth in 2025 is solid, investors should monitor its exposure to cyclical sectors like construction. For now, though, its cash flow resilience and backlog growth make it a top pick for value-oriented portfolios.

The Bottom Line: Where to Allocate Capital

Atour Lifestyle Holdings offers a blend of margin stability and retail innovation, but its FCF volatility requires patience. KE Holdings' strategic reinvention is promising, yet its cash flow inconsistencies demand caution. Comfort Systems USA, however, stands out as a cash flow machine with a self-fueling backlog.

For investors prioritizing cash flow-based valuation, Comfort Systems is the clear winner. Atour's long-term growth potential is undeniable, but its retail pivot carries execution risks. KE, meanwhile, is a speculative play-ideal for those willing to bet on its AI-driven transformation.

In a sector where margins can evaporate quickly, the companies that master cash flow and operational leverage will outperform. The question isn't just which stocks are undervalued-it's which ones can sustain their value through the next cycle.