Intrinsic value of Hilton Worldwide Holdings - HLT

Previous Close

$71.04

  Intrinsic Value

$131.88

stock screener

  Rating & Target

str. buy

+86%

Previous close

$71.04

 
Intrinsic value

$131.88

 
Up/down potential

+86%

 
Rating

str. buy

We calculate the intrinsic value of HLT 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 22.8

 

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, %
  3.47
  20.30
  18.77
  17.39
  16.15
  15.04
  14.03
  13.13
  12.32
  11.59
  10.93
  10.33
  9.80
  9.32
  8.89
  8.50
  8.15
  7.84
  7.55
  7.30
  7.07
  6.86
  6.67
  6.51
  6.36
  6.22
  6.10
  5.99
  5.89
  5.80
  5.72
Revenue, $m
  11,663
  14,031
  16,664
  19,563
  22,723
  26,140
  29,808
  33,722
  37,876
  42,265
  46,883
  51,728
  56,799
  62,093
  67,612
  73,359
  79,338
  85,555
  92,015
  98,729
  105,706
  112,958
  120,497
  128,337
  136,494
  144,985
  153,826
  163,038
  172,641
  182,655
  193,104
Variable operating expenses, $m
 
  11,343
  13,374
  15,610
  18,047
  20,682
  23,512
  26,531
  29,734
  33,119
  36,681
  39,896
  43,806
  47,890
  52,147
  56,579
  61,191
  65,985
  70,968
  76,146
  81,527
  87,120
  92,934
  98,981
  105,273
  111,821
  118,640
  125,745
  133,151
  140,875
  148,934
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
  9,828
  11,343
  13,374
  15,610
  18,047
  20,682
  23,512
  26,531
  29,734
  33,119
  36,681
  39,896
  43,806
  47,890
  52,147
  56,579
  61,191
  65,985
  70,968
  76,146
  81,527
  87,120
  92,934
  98,981
  105,273
  111,821
  118,640
  125,745
  133,151
  140,875
  148,934
Operating income, $m
  1,835
  2,688
  3,290
  3,953
  4,676
  5,457
  6,297
  7,192
  8,142
  9,146
  10,202
  11,832
  12,992
  14,203
  15,466
  16,780
  18,148
  19,570
  21,048
  22,583
  24,179
  25,838
  27,562
  29,356
  31,222
  33,164
  35,186
  37,293
  39,490
  41,781
  44,171
EBITDA, $m
  2,521
  3,757
  4,462
  5,238
  6,084
  6,999
  7,981
  9,029
  10,141
  11,316
  12,553
  13,850
  15,208
  16,625
  18,103
  19,642
  21,243
  22,907
  24,637
  26,435
  28,303
  30,244
  32,263
  34,362
  36,546
  38,819
  41,187
  43,653
  46,224
  48,906
  51,703
Interest expense (income), $m
  478
  369
  598
  854
  1,136
  1,443
  1,776
  2,133
  2,513
  2,917
  3,344
  3,794
  4,265
  4,758
  5,273
  5,810
  6,369
  6,951
  7,555
  8,184
  8,837
  9,516
  10,221
  10,954
  11,717
  12,511
  13,337
  14,197
  15,093
  16,027
  17,001
Earnings before tax, $m
  1,255
  2,319
  2,692
  3,099
  3,540
  4,014
  4,521
  5,059
  5,629
  6,228
  6,858
  8,039
  8,727
  9,445
  10,192
  10,970
  11,779
  12,619
  13,492
  14,399
  15,342
  16,322
  17,341
  18,401
  19,505
  20,653
  21,850
  23,097
  24,397
  25,754
  27,170
Tax expense, $m
  891
  626
  727
  837
  956
  1,084
  1,221
  1,366
  1,520
  1,682
  1,852
  2,170
  2,356
  2,550
  2,752
  2,962
  3,180
  3,407
  3,643
  3,888
  4,142
  4,407
  4,682
  4,968
  5,266
  5,576
  5,899
  6,236
  6,587
  6,954
  7,336
Net income, $m
  348
  1,693
  1,965
  2,262
  2,584
  2,930
  3,300
  3,693
  4,109
  4,547
  5,006
  5,868
  6,371
  6,895
  7,440
  8,008
  8,598
  9,212
  9,849
  10,512
  11,200
  11,915
  12,659
  13,433
  14,238
  15,077
  15,950
  16,861
  17,810
  18,800
  19,834

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  1,062
  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
  26,211
  30,238
  35,914
  42,161
  48,971
  56,336
  64,242
  72,678
  81,630
  91,088
  101,041
  111,484
  122,411
  133,821
  145,716
  158,102
  170,988
  184,385
  198,309
  212,778
  227,815
  243,443
  259,691
  276,588
  294,169
  312,467
  331,523
  351,376
  372,071
  393,654
  416,173
Adjusted assets (=assets-cash), $m
  25,149
  30,238
  35,914
  42,161
  48,971
  56,336
  64,242
  72,678
  81,630
  91,088
  101,041
  111,484
  122,411
  133,821
  145,716
  158,102
  170,988
  184,385
  198,309
  212,778
  227,815
  243,443
  259,691
  276,588
  294,169
  312,467
  331,523
  351,376
  372,071
  393,654
  416,173
Revenue / Adjusted assets
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
  0.464
Average production assets, $m
  11,016
  13,245
  15,731
  18,467
  21,450
  24,676
  28,139
  31,834
  35,755
  39,898
  44,258
  48,832
  53,618
  58,616
  63,826
  69,251
  74,895
  80,764
  86,862
  93,200
  99,787
  106,632
  113,749
  121,150
  128,851
  136,866
  145,212
  153,908
  162,973
  172,427
  182,291
Working capital, $m
  873
  -182
  -217
  -254
  -295
  -340
  -388
  -438
  -492
  -549
  -609
  -672
  -738
  -807
  -879
  -954
  -1,031
  -1,112
  -1,196
  -1,283
  -1,374
  -1,468
  -1,566
  -1,668
  -1,774
  -1,885
  -2,000
  -2,119
  -2,244
  -2,375
  -2,510
Total debt, $m
  6,616
  10,676
  15,251
  20,285
  25,775
  31,710
  38,083
  44,882
  52,098
  59,721
  67,743
  76,160
  84,967
  94,164
  103,751
  113,734
  124,120
  134,918
  146,141
  157,803
  169,923
  182,519
  195,615
  209,234
  223,404
  238,152
  253,511
  269,513
  286,193
  303,589
  321,740
Total liabilities, $m
  20,312
  24,372
  28,947
  33,981
  39,471
  45,406
  51,779
  58,578
  65,794
  73,417
  81,439
  89,856
  98,663
  107,860
  117,447
  127,430
  137,816
  148,614
  159,837
  171,499
  183,619
  196,215
  209,311
  222,930
  237,100
  251,848
  267,207
  283,209
  299,889
  317,285
  335,436
Total equity, $m
  5,899
  5,866
  6,967
  8,179
  9,500
  10,929
  12,463
  14,099
  15,836
  17,671
  19,602
  21,628
  23,748
  25,961
  28,269
  30,672
  33,172
  35,771
  38,472
  41,279
  44,196
  47,228
  50,380
  53,658
  57,069
  60,619
  64,315
  68,167
  72,182
  76,369
  80,738
Total liabilities and equity, $m
  26,211
  30,238
  35,914
  42,160
  48,971
  56,335
  64,242
  72,677
  81,630
  91,088
  101,041
  111,484
  122,411
  133,821
  145,716
  158,102
  170,988
  184,385
  198,309
  212,778
  227,815
  243,443
  259,691
  276,588
  294,169
  312,467
  331,522
  351,376
  372,071
  393,654
  416,174
Debt-to-equity ratio
  1.122
  1.820
  2.190
  2.480
  2.710
  2.900
  3.060
  3.180
  3.290
  3.380
  3.460
  3.520
  3.580
  3.630
  3.670
  3.710
  3.740
  3.770
  3.800
  3.820
  3.840
  3.860
  3.880
  3.900
  3.910
  3.930
  3.940
  3.950
  3.960
  3.980
  3.990
Adjusted equity ratio
  0.192
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194
  0.194

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  348
  1,693
  1,965
  2,262
  2,584
  2,930
  3,300
  3,693
  4,109
  4,547
  5,006
  5,868
  6,371
  6,895
  7,440
  8,008
  8,598
  9,212
  9,849
  10,512
  11,200
  11,915
  12,659
  13,433
  14,238
  15,077
  15,950
  16,861
  17,810
  18,800
  19,834
Depreciation, amort., depletion, $m
  686
  1,069
  1,172
  1,285
  1,408
  1,541
  1,685
  1,837
  1,999
  2,170
  2,351
  2,018
  2,216
  2,422
  2,637
  2,862
  3,095
  3,337
  3,589
  3,851
  4,123
  4,406
  4,700
  5,006
  5,324
  5,656
  6,001
  6,360
  6,734
  7,125
  7,533
Funds from operations, $m
  1,814
  2,762
  3,137
  3,547
  3,992
  4,472
  4,985
  5,530
  6,108
  6,717
  7,357
  7,886
  8,586
  9,317
  10,078
  10,870
  11,693
  12,549
  13,439
  14,363
  15,323
  16,322
  17,360
  18,439
  19,563
  20,732
  21,951
  23,220
  24,544
  25,925
  27,367
Change in working capital, $m
  464
  -31
  -34
  -38
  -41
  -44
  -48
  -51
  -54
  -57
  -60
  -63
  -66
  -69
  -72
  -75
  -78
  -81
  -84
  -87
  -91
  -94
  -98
  -102
  -106
  -110
  -115
  -120
  -125
  -130
  -136
Cash from operations, $m
  1,350
  2,793
  3,171
  3,585
  4,033
  4,516
  5,032
  5,581
  6,162
  6,774
  7,417
  7,949
  8,652
  9,386
  10,150
  10,945
  11,771
  12,630
  13,523
  14,450
  15,414
  16,416
  17,458
  18,541
  19,669
  20,843
  22,066
  23,340
  24,669
  26,055
  27,502
Maintenance CAPEX, $m
  0
  -455
  -547
  -650
  -763
  -886
  -1,020
  -1,163
  -1,315
  -1,477
  -1,649
  -1,829
  -2,018
  -2,216
  -2,422
  -2,637
  -2,862
  -3,095
  -3,337
  -3,589
  -3,851
  -4,123
  -4,406
  -4,700
  -5,006
  -5,324
  -5,656
  -6,001
  -6,360
  -6,734
  -7,125
New CAPEX, $m
  -453
  -2,229
  -2,486
  -2,736
  -2,983
  -3,226
  -3,463
  -3,695
  -3,921
  -4,143
  -4,360
  -4,574
  -4,786
  -4,998
  -5,210
  -5,425
  -5,644
  -5,868
  -6,099
  -6,338
  -6,586
  -6,845
  -7,117
  -7,401
  -7,700
  -8,015
  -8,347
  -8,696
  -9,065
  -9,454
  -9,864
Cash from investing activities, $m
  -478
  -2,684
  -3,033
  -3,386
  -3,746
  -4,112
  -4,483
  -4,858
  -5,236
  -5,620
  -6,009
  -6,403
  -6,804
  -7,214
  -7,632
  -8,062
  -8,506
  -8,963
  -9,436
  -9,927
  -10,437
  -10,968
  -11,523
  -12,101
  -12,706
  -13,339
  -14,003
  -14,697
  -15,425
  -16,188
  -16,989
Free cash flow, $m
  872
  108
  138
  199
  287
  404
  550
  724
  925
  1,154
  1,408
  1,546
  1,848
  2,172
  2,517
  2,882
  3,265
  3,667
  4,086
  4,523
  4,976
  5,447
  5,934
  6,439
  6,962
  7,503
  8,064
  8,644
  9,245
  9,867
  10,513
Issuance/(repayment) of debt, $m
  356
  4,093
  4,575
  5,035
  5,489
  5,936
  6,373
  6,799
  7,216
  7,623
  8,023
  8,417
  8,807
  9,197
  9,588
  9,983
  10,386
  10,798
  11,223
  11,662
  12,120
  12,596
  13,096
  13,619
  14,170
  14,749
  15,359
  16,002
  16,680
  17,396
  18,151
Issuance/(repurchase) of shares, $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
  0
Cash from financing (excl. dividends), $m  
  248
  4,093
  4,575
  5,035
  5,489
  5,936
  6,373
  6,799
  7,216
  7,623
  8,023
  8,417
  8,807
  9,197
  9,588
  9,983
  10,386
  10,798
  11,223
  11,662
  12,120
  12,596
  13,096
  13,619
  14,170
  14,749
  15,359
  16,002
  16,680
  17,396
  18,151
Total cash flow (excl. dividends), $m
  1,105
  4,201
  4,713
  5,233
  5,776
  6,340
  6,922
  7,523
  8,141
  8,777
  9,431
  9,963
  10,655
  11,369
  12,105
  12,865
  13,651
  14,465
  15,309
  16,185
  17,096
  18,043
  19,030
  20,059
  21,132
  22,252
  23,422
  24,645
  25,925
  27,263
  28,664
Retained Cash Flow (-), $m
  86
  -996
  -1,101
  -1,212
  -1,321
  -1,429
  -1,534
  -1,637
  -1,737
  -1,835
  -1,931
  -2,026
  -2,120
  -2,214
  -2,308
  -2,403
  -2,500
  -2,599
  -2,701
  -2,807
  -2,917
  -3,032
  -3,152
  -3,278
  -3,411
  -3,550
  -3,697
  -3,852
  -4,015
  -4,187
  -4,369
Prev. year cash balance distribution, $m
 
  1,029
  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
 
  4,234
  3,611
  4,022
  4,455
  4,911
  5,388
  5,886
  6,404
  6,942
  7,500
  7,937
  8,536
  9,155
  9,797
  10,462
  11,151
  11,866
  12,608
  13,378
  14,179
  15,011
  15,878
  16,781
  17,721
  18,702
  19,725
  20,794
  21,910
  23,076
  24,295
Discount rate, %
 
  7.90
  8.30
  8.71
  9.15
  9.60
  10.08
  10.59
  11.12
  11.67
  12.26
  12.87
  13.51
  14.19
  14.90
  15.64
  16.42
  17.24
  18.11
  19.01
  19.96
  20.96
  22.01
  23.11
  24.27
  25.48
  26.75
  28.09
  29.49
  30.97
  32.52
PV of cash for distribution, $m
 
  3,924
  3,079
  3,130
  3,139
  3,105
  3,028
  2,910
  2,756
  2,570
  2,360
  2,096
  1,865
  1,632
  1,402
  1,183
  979
  794
  630
  490
  372
  276
  200
  141
  96
  64
  42
  26
  16
  9
  5
Current shareholders' claim on cash, %
  100
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Hilton Worldwide Holdings Inc. is a hospitality company. The Company is engaged in owning, leasing, managing and franchising hotels and resorts. The Company's segments include ownership, and management and franchise. Its global portfolio of owned and leased properties includes a range of hotels in gateway cities, such as New York City, London, San Francisco, Chicago, Sao Paolo and Tokyo. The Company's management and franchise segment manages hotels and licenses its brands to franchisees. Its brand portfolio includes Hilton Hotels & Resorts, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton, Curio-A Collection by Hilton, DoubleTree by Hilton, Embassy Suites by Hilton, Hilton Garden Inn, Hampton by Hilton, Tru by Hilton, Homewood Suites by Hilton and Home2 Suites by Hilton. As of December 31, 2016, the Company owned, leased, managed or franchised 4,875 hotel and resort properties, totaling 796,440 rooms in 104 countries and territories.

FINANCIAL RATIOS  of  Hilton Worldwide Holdings (HLT)

Valuation Ratios
P/E Ratio 67.2
Price to Sales 2
Price to Book 4
Price to Tangible Book
Price to Cash Flow 17.3
Price to Free Cash Flow 26.1
Growth Rates
Sales Growth Rate 3.5%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 10.8%
Cap. Spend. - 3 Yr. Gr. Rate 3.8%
Financial Strength
Quick Ratio 32
Current Ratio 0.6
LT Debt to Equity 111.6%
Total Debt to Equity 112.2%
Interest Coverage 4
Management Effectiveness
Return On Assets 1.9%
Ret/ On Assets - 3 Yr. Avg. 4.3%
Return On Total Capital 2.4%
Ret/ On T. Cap. - 3 Yr. Avg. 5%
Return On Equity 5.9%
Return On Equity - 3 Yr. Avg. 15.6%
Asset Turnover 0.5
Profitability Ratios
Gross Margin 61.9%
Gross Margin - 3 Yr. Avg. 63.4%
EBITDA Margin 20.7%
EBITDA Margin - 3 Yr. Avg. 22.1%
Operating Margin 15.7%
Oper. Margin - 3 Yr. Avg. 16.8%
Pre-Tax Margin 10.8%
Pre-Tax Margin - 3 Yr. Avg. 11.7%
Net Profit Margin 3%
Net Profit Margin - 3 Yr. Avg. 7.3%
Effective Tax Rate 71%
Eff/ Tax Rate - 3 Yr. Avg. 39%
Payout Ratio 79.6%

HLT stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the HLT stock intrinsic value calculation we used $11663 million for the last fiscal year's total revenue generated by Hilton Worldwide Holdings. The default revenue input number comes from 2016 income statement of Hilton Worldwide Holdings. 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 HLT stock valuation model: a) initial revenue growth rate of 20.3% 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 7.9%, whose default value for HLT is calculated based on our internal credit rating of Hilton Worldwide Holdings, 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 Hilton Worldwide Holdings.
    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 HLT stock the variable cost ratio is equal to 81.6%.

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 HLT 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 5.6% for Hilton Worldwide Holdings.

Corporate tax rate of 27% is the nominal tax rate for Hilton Worldwide Holdings. 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 HLT 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 HLT are equal to 94.4%.

Life of production assets of 24.2 years is the average useful life of capital assets used in Hilton Worldwide Holdings 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 HLT is equal to -1.3%. 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 - $5899 million for Hilton Worldwide Holdings - 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 320.946 million for Hilton Worldwide Holdings 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 Hilton Worldwide Holdings at the current share price and the inputted number of shares is $22.8 billion.

RELATED COMPANIES Price Int.Val. Rating
MAR Marriott Inter 115.02 597.63  str.buy
H Hyatt Hotels 61.85 17.87  str.sell
PCLN Priceline Grou 1,942.11 2,134.46  hold
CHH Choice Hotels 67.95 9.26  str.sell
LQ La Quinta Hold 18.11 1.89  str.sell
IHG InterContinent 53.66 17.85  str.sell
WYN Wyndham Worldw 109.00 90.28  hold

COMPANY NEWS

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▶ Embassy Suites adds to Kapoleis growing tourism industry: Slideshow   [Oct-12-17 07:20PM  American City Business Journals]
▶ Homewood Suites by Hilton Opens First Los Angeles Property   [Oct-10-17 11:00AM  Business Wire]
▶ Georgetown hotel to join Hilton's newest collection, Tapestry   [08:05AM  American City Business Journals]
▶ Is It Time To Lock In Your Stock Gains?   [Oct-09-17 06:00AM  Investopedia]
▶ Hilton Prices Secondary Offering   [Sep-28-17 08:51PM  Business Wire]
▶ Hilton Gears Up to Enter Midscale Segment in Shiyan   [Sep-27-17 11:24PM  PR Newswire]
▶ These 5 Top Hotel, Casino Stocks Are Buys, But Watch Out For This   [Sep-25-17 08:25AM  Investor's Business Daily]
▶ Hotel Investors May Be Ignoring the Airbnb Threat   [Sep-24-17 08:32AM  Motley Fool]
▶ Stocks Continue Snail's Pace; Dow Eases Despite Verizon's Climb   [Sep-22-17 04:20PM  Investor's Business Daily]
▶ Chicago ad man Tom Burrell makes history with a top honor   [Sep-20-17 02:46PM  American City Business Journals]
▶ Big downtown Denver hotel gets a new brand, new management   [Sep-19-17 07:03PM  American City Business Journals]
▶ Hilton Announces New Head of Brand Communications   [Sep-12-17 11:00AM  Business Wire]
▶ Lodging Selloff Looks Overdone   [Sep-08-17 11:11AM  Barrons.com]
▶ The Latest on Hurricane Irma   [04:59AM  Bloomberg]
▶ Construction underway on first hotel at Stonewall Station   [Sep-06-17 01:55PM  American City Business Journals]
▶ Hilton Appoints Melanie L. Healey to Board of Directors   [Sep-01-17 07:00AM  Business Wire]
▶ Three Hotel Stocks With 20% Upside   [11:35AM  Barrons.com]
▶ Eclipse Boosts Lodging Demand   [10:03AM  Barrons.com]
▶ Bill Ackman Comments on Hilton Worldwide Holdings   [Aug-18-17 01:42PM  GuruFocus.com]
▶ Americas Best Companies to Work For   [Aug-11-17 06:14PM  24/7 Wall St.]
▶ Amazon, Hilton among top trusted brands   [12:12PM  American City Business Journals]
▶ Home2 Suites by Hilton Mishawaka South Bend Opens   [Aug-10-17 03:07PM  PR Newswire]
▶ Tru by Hilton Set to be Developed in Orlando, Florida   [Aug-09-17 05:42PM  PR Newswire]
▶ Marriott Internationals Valuation: What Is Priced In?   [Aug-08-17 08:07AM  Market Realist]
Financial statements of HLT
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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