Intrinsic value of Felcor Lodging Trust - FCH

Previous Close

$7.30

  Intrinsic Value

$0.41

stock screener

  Rating & Target

str. sell

-94%

  Value-price divergence*

-72%

Previous close

$7.30

 
Intrinsic value

$0.41

 
Up/down potential

-94%

 
Rating

str. sell

 
Value-price divergence*

-72%

Our model is not good at valuating stocks of financial companies, such as FCH.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of FCH stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 1.0

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  -2.14
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  867
  884
  905
  928
  954
  983
  1,015
  1,049
  1,087
  1,127
  1,170
  1,216
  1,266
  1,318
  1,374
  1,434
  1,496
  1,563
  1,633
  1,708
  1,786
  1,869
  1,956
  2,048
  2,145
  2,247
  2,355
  2,468
  2,587
  2,712
  2,844
Variable operating expenses, $m
 
  836
  855
  877
  902
  929
  959
  992
  1,027
  1,065
  1,106
  1,150
  1,196
  1,246
  1,299
  1,355
  1,414
  1,477
  1,543
  1,614
  1,688
  1,766
  1,848
  1,935
  2,027
  2,124
  2,225
  2,332
  2,445
  2,563
  2,688
Fixed operating expenses, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  789
  836
  855
  877
  902
  929
  959
  992
  1,027
  1,065
  1,106
  1,150
  1,196
  1,246
  1,299
  1,355
  1,414
  1,477
  1,543
  1,614
  1,688
  1,766
  1,848
  1,935
  2,027
  2,124
  2,225
  2,332
  2,445
  2,563
  2,688
Operating income, $m
  78
  49
  50
  51
  52
  54
  56
  58
  60
  62
  64
  67
  70
  73
  76
  79
  82
  86
  90
  94
  98
  103
  108
  113
  118
  124
  130
  136
  142
  149
  156
EBITDA, $m
  192
  165
  168
  173
  178
  183
  189
  195
  202
  210
  218
  226
  236
  245
  256
  267
  278
  291
  304
  318
  332
  348
  364
  381
  399
  418
  438
  459
  481
  505
  529
Interest expense (income), $m
  75
  74
  75
  77
  79
  82
  85
  88
  91
  94
  98
  102
  107
  111
  116
  121
  127
  133
  139
  146
  153
  160
  168
  176
  185
  194
  204
  214
  224
  235
  247
Earnings before tax, $m
  8
  -25
  -26
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -55
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -86
  -91
Tax expense, $m
  1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Net income, $m
  5
  -25
  -26
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -55
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -86
  -91

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  47
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  1,707
  1,694
  1,733
  1,778
  1,828
  1,883
  1,944
  2,010
  2,082
  2,159
  2,242
  2,330
  2,425
  2,526
  2,633
  2,746
  2,867
  2,994
  3,129
  3,271
  3,421
  3,580
  3,747
  3,924
  4,109
  4,305
  4,511
  4,728
  4,956
  5,196
  5,448
Adjusted assets (=assets-cash), $m
  1,660
  1,694
  1,733
  1,778
  1,828
  1,883
  1,944
  2,010
  2,082
  2,159
  2,242
  2,330
  2,425
  2,526
  2,633
  2,746
  2,867
  2,994
  3,129
  3,271
  3,421
  3,580
  3,747
  3,924
  4,109
  4,305
  4,511
  4,728
  4,956
  5,196
  5,448
Revenue / Adjusted assets
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
  0.522
Average production assets, $m
  1,648
  1,681
  1,720
  1,764
  1,814
  1,869
  1,929
  1,995
  2,066
  2,142
  2,225
  2,313
  2,406
  2,506
  2,613
  2,725
  2,845
  2,971
  3,105
  3,246
  3,395
  3,553
  3,718
  3,893
  4,078
  4,272
  4,476
  4,691
  4,918
  5,156
  5,406
Working capital, $m
  0
  -48
  -49
  -50
  -52
  -53
  -55
  -57
  -59
  -61
  -63
  -66
  -68
  -71
  -74
  -77
  -81
  -84
  -88
  -92
  -96
  -101
  -106
  -111
  -116
  -121
  -127
  -133
  -140
  -146
  -154
Total debt, $m
  1,338
  1,369
  1,404
  1,443
  1,488
  1,538
  1,592
  1,651
  1,715
  1,784
  1,858
  1,937
  2,022
  2,111
  2,207
  2,308
  2,416
  2,530
  2,650
  2,777
  2,911
  3,053
  3,202
  3,360
  3,526
  3,700
  3,884
  4,078
  4,282
  4,496
  4,721
Total liabilities, $m
  1,482
  1,513
  1,548
  1,587
  1,632
  1,682
  1,736
  1,795
  1,859
  1,928
  2,002
  2,081
  2,166
  2,255
  2,351
  2,452
  2,560
  2,674
  2,794
  2,921
  3,055
  3,197
  3,346
  3,504
  3,670
  3,844
  4,028
  4,222
  4,426
  4,640
  4,865
Total equity, $m
  225
  181
  185
  190
  196
  201
  208
  215
  223
  231
  240
  249
  259
  270
  282
  294
  307
  320
  335
  350
  366
  383
  401
  420
  440
  461
  483
  506
  530
  556
  583
Total liabilities and equity, $m
  1,707
  1,694
  1,733
  1,777
  1,828
  1,883
  1,944
  2,010
  2,082
  2,159
  2,242
  2,330
  2,425
  2,525
  2,633
  2,746
  2,867
  2,994
  3,129
  3,271
  3,421
  3,580
  3,747
  3,924
  4,110
  4,305
  4,511
  4,728
  4,956
  5,196
  5,448
Debt-to-equity ratio
  5.947
  7.550
  7.570
  7.590
  7.610
  7.630
  7.650
  7.680
  7.700
  7.720
  7.750
  7.770
  7.790
  7.810
  7.830
  7.860
  7.880
  7.900
  7.920
  7.930
  7.950
  7.970
  7.990
  8.000
  8.020
  8.030
  8.050
  8.060
  8.070
  8.090
  8.100
Adjusted equity ratio
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107
  0.107

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  5
  -25
  -26
  -26
  -27
  -28
  -29
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -55
  -57
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -86
  -91
Depreciation, amort., depletion, $m
  114
  116
  119
  122
  125
  129
  133
  138
  142
  148
  153
  159
  166
  173
  180
  188
  196
  205
  214
  224
  234
  245
  256
  269
  281
  295
  309
  324
  339
  356
  373
Funds from operations, $m
  116
  91
  93
  95
  98
  101
  104
  108
  111
  115
  120
  124
  129
  134
  140
  145
  152
  158
  165
  172
  180
  188
  196
  205
  214
  224
  235
  246
  257
  269
  282
Change in working capital, $m
  -19
  -1
  -1
  -1
  -1
  -2
  -2
  -2
  -2
  -2
  -2
  -2
  -3
  -3
  -3
  -3
  -3
  -4
  -4
  -4
  -4
  -4
  -5
  -5
  -5
  -6
  -6
  -6
  -6
  -7
  -7
Cash from operations, $m
  135
  92
  94
  97
  100
  103
  106
  110
  113
  118
  122
  127
  132
  137
  143
  149
  155
  162
  169
  176
  184
  192
  201
  210
  220
  230
  241
  252
  264
  276
  289
Maintenance CAPEX, $m
  0
  -114
  -116
  -119
  -122
  -125
  -129
  -133
  -138
  -142
  -148
  -153
  -159
  -166
  -173
  -180
  -188
  -196
  -205
  -214
  -224
  -234
  -245
  -256
  -269
  -281
  -295
  -309
  -324
  -339
  -356
New CAPEX, $m
  -82
  -33
  -39
  -44
  -50
  -55
  -60
  -66
  -71
  -77
  -82
  -88
  -94
  -100
  -106
  -113
  -119
  -126
  -134
  -141
  -149
  -157
  -166
  -175
  -184
  -194
  -204
  -215
  -226
  -238
  -251
Cash from investing activities, $m
  19
  -147
  -155
  -163
  -172
  -180
  -189
  -199
  -209
  -219
  -230
  -241
  -253
  -266
  -279
  -293
  -307
  -322
  -339
  -355
  -373
  -391
  -411
  -431
  -453
  -475
  -499
  -524
  -550
  -577
  -607
Free cash flow, $m
  154
  -55
  -60
  -66
  -72
  -77
  -83
  -89
  -95
  -101
  -108
  -115
  -122
  -129
  -136
  -144
  -152
  -161
  -170
  -179
  -189
  -199
  -210
  -221
  -233
  -246
  -258
  -272
  -286
  -301
  -317
Issuance/(repayment) of debt, $m
  -74
  31
  35
  40
  45
  49
  54
  59
  64
  69
  74
  79
  84
  90
  96
  101
  107
  114
  120
  127
  134
  142
  149
  157
  166
  175
  184
  194
  204
  214
  225
Issuance/(repurchase) of shares, $m
  -30
  28
  30
  31
  32
  34
  35
  37
  39
  41
  43
  45
  47
  49
  52
  55
  58
  61
  64
  67
  71
  74
  78
  82
  87
  91
  96
  101
  106
  112
  118
Cash from financing (excl. dividends), $m  
  -106
  59
  65
  71
  77
  83
  89
  96
  103
  110
  117
  124
  131
  139
  148
  156
  165
  175
  184
  194
  205
  216
  227
  239
  253
  266
  280
  295
  310
  326
  343
Total cash flow (excl. dividends), $m
  48
  4
  4
  5
  5
  6
  6
  7
  7
  8
  9
  9
  10
  11
  11
  12
  13
  13
  14
  15
  16
  17
  17
  18
  19
  20
  21
  23
  24
  25
  26
Retained Cash Flow (-), $m
  78
  -28
  -30
  -31
  -32
  -34
  -35
  -37
  -39
  -41
  -43
  -45
  -47
  -49
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -74
  -78
  -82
  -87
  -91
  -96
  -101
  -106
  -112
  -118
Prev. year cash balance distribution, $m
 
  47
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  23
  -26
  -26
  -27
  -28
  -29
  -30
  -31
  -33
  -34
  -36
  -37
  -39
  -41
  -43
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
  -67
  -71
  -75
  -78
  -83
  -87
  -92
Discount rate, %
 
  12.10
  12.71
  13.34
  14.01
  14.71
  15.44
  16.22
  17.03
  17.88
  18.77
  19.71
  20.70
  21.73
  22.82
  23.96
  25.16
  26.41
  27.73
  29.12
  30.58
  32.10
  33.71
  35.40
  37.17
  39.02
  40.97
  43.02
  45.17
  47.43
  49.81
PV of cash for distribution, $m
 
  21
  -20
  -18
  -16
  -14
  -12
  -10
  -9
  -7
  -6
  -5
  -4
  -3
  -2
  -2
  -1
  -1
  -1
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Current shareholders' claim on cash, %
  100
  96.6
  93.2
  89.9
  86.6
  83.4
  80.3
  77.3
  74.3
  71.4
  68.6
  65.9
  63.2
  60.6
  58.2
  55.8
  53.4
  51.2
  49.0
  46.9
  44.9
  43.0
  41.1
  39.3
  37.6
  36.0
  34.4
  32.8
  31.4
  30.0
  28.6

FelCor Lodging Trust Incorporated is a real estate investment trust (REIT). The Company, through its subsidiary, FelCor Lodging Limited Partnership, held ownership interests in 39 hotels with 11,500 rooms, as of December 31, 2016. The Company sells, acquires, rebrands and redevelops hotels. As of December 31, 2016, the Company's hotels were located in 14 states of the United States. The Company holds a portfolio of hotels managed by Hilton Worldwide (Hilton); Wyndham Worldwide (Wyndham); Marriott International Inc. (Marriott); InterContinental Hotels Group (IHG); AccorHotels Group, Highgate Hotels (Highgate), SBE and Aimbridge Hospitality. The Company's hotels include Embassy Suites Atlanta-Buckhead; DoubleTree Suites by Hilton Austin; Embassy Suites Birmingham; The Fairmont Copley Plaza, Boston; Wyndham Boston Beacon Hill; Embassy Suites Boston-Marlborough, and Sheraton Burlington Hotel & Conference Center.

FINANCIAL RATIOS  of  Felcor Lodging Trust (FCH)

Valuation Ratios
P/E Ratio 201.5
Price to Sales 1.2
Price to Book 4.5
Price to Tangible Book
Price to Cash Flow 7.5
Price to Free Cash Flow 19
Growth Rates
Sales Growth Rate -2.1%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 70.8%
Cap. Spend. - 3 Yr. Gr. Rate -4.1%
Financial Strength
Quick Ratio NaN
Current Ratio NaN
LT Debt to Equity 594.7%
Total Debt to Equity 594.7%
Interest Coverage 1
Management Effectiveness
Return On Assets 4%
Ret/ On Assets - 3 Yr. Avg. 5.7%
Return On Total Capital 0.3%
Ret/ On T. Cap. - 3 Yr. Avg. 1.6%
Return On Equity 1.9%
Return On Equity - 3 Yr. Avg. 9.7%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 64.7%
Gross Margin - 3 Yr. Avg. 64.5%
EBITDA Margin 22.7%
EBITDA Margin - 3 Yr. Avg. 25.3%
Operating Margin 9%
Oper. Margin - 3 Yr. Avg. 7.1%
Pre-Tax Margin 0.9%
Pre-Tax Margin - 3 Yr. Avg. 3.6%
Net Profit Margin 0.6%
Net Profit Margin - 3 Yr. Avg. 3.3%
Effective Tax Rate 12.5%
Eff/ Tax Rate - 3 Yr. Avg. -6.9%
Payout Ratio 1200%

FCH stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the FCH stock intrinsic value calculation we used $867 million for the last fiscal year's total revenue generated by Felcor Lodging Trust. The default revenue input number comes from 2016 income statement of Felcor Lodging Trust. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our FCH stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 12.1%, whose default value for FCH is calculated based on our internal credit rating of Felcor Lodging Trust, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Felcor Lodging Trust.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of FCH stock the variable cost ratio is equal to 94.5%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for FCH stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.5% for Felcor Lodging Trust.

Corporate tax rate of 27% is the nominal tax rate for Felcor Lodging Trust. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the FCH stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for FCH are equal to 190.1%.

Life of production assets of 14.5 years is the average useful life of capital assets used in Felcor Lodging Trust operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for FCH is equal to -5.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $225 million for Felcor Lodging Trust - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 138.816 million for Felcor Lodging Trust is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Felcor Lodging Trust at the current share price and the inputted number of shares is $1.0 billion.

RELATED COMPANIES Price Int.Val. Rating
AHT Ashford Hospit 7.01 20.77  str.buy
WYN Wyndham Worldw 110.02 90.24  hold
HLT Hilton Worldwi 71.13 129.36  str.buy
MAR Marriott Inter 114.75 591.44  str.buy
BLK BlackRock 477.96 1,173.08  str.buy
HPT Hospitality Pr 29.05 4.76  str.sell
RLJ RLJ Lodging Tr 22.38 6.69  str.sell
Financial statements of FCH
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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