Intrinsic value of Marriott International - MAR

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$104.06

  Intrinsic Value

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  Value-price divergence*

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$104.06

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

We calculate the intrinsic value of MAR 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 39.7

 

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, %
  17.85
  47.20
  42.98
  39.18
  35.76
  32.69
  29.92
  27.43
  25.18
  23.17
  21.35
  19.71
  18.24
  16.92
  15.73
  14.65
  13.69
  12.82
  12.04
  11.33
  10.70
  10.13
  9.62
  9.16
  8.74
  8.37
  8.03
  7.73
  7.45
  7.21
  6.99
Revenue, $m
  17,072
  25,130
  35,931
  50,009
  67,894
  90,087
  117,040
  149,141
  186,701
  229,951
  279,044
  334,055
  394,996
  461,824
  534,453
  612,772
  696,652
  785,961
  880,573
  980,378
  1,085,284
  1,195,229
  1,310,180
  1,430,136
  1,555,133
  1,685,237
  1,820,554
  1,961,220
  2,107,408
  2,259,321
  2,417,195
Variable operating expenses, $m
 
  22,434
  31,750
  43,893
  59,318
  78,460
  101,707
  129,393
  161,788
  199,091
  241,434
  288,121
  340,682
  398,321
  460,963
  528,513
  600,859
  677,887
  759,490
  845,570
  936,051
  1,030,878
  1,130,023
  1,233,485
  1,341,293
  1,453,508
  1,570,217
  1,691,542
  1,817,628
  1,948,652
  2,084,817
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
  15,704
  22,434
  31,750
  43,893
  59,318
  78,460
  101,707
  129,393
  161,788
  199,091
  241,434
  288,121
  340,682
  398,321
  460,963
  528,513
  600,859
  677,887
  759,490
  845,570
  936,051
  1,030,878
  1,130,023
  1,233,485
  1,341,293
  1,453,508
  1,570,217
  1,691,542
  1,817,628
  1,948,652
  2,084,817
Operating income, $m
  1,368
  2,696
  4,181
  6,117
  8,576
  11,628
  15,334
  19,748
  24,913
  30,860
  37,610
  45,934
  54,314
  63,503
  73,490
  84,260
  95,794
  108,074
  121,084
  134,807
  149,233
  164,351
  180,157
  196,652
  213,839
  231,730
  250,336
  269,679
  289,780
  310,669
  332,378
EBITDA, $m
  1,536
  3,801
  5,435
  7,565
  10,271
  13,628
  17,705
  22,561
  28,243
  34,785
  42,212
  50,533
  59,752
  69,861
  80,848
  92,695
  105,384
  118,894
  133,206
  148,304
  164,173
  180,805
  198,194
  216,340
  235,248
  254,930
  275,399
  296,678
  318,792
  341,773
  365,655
Interest expense (income), $m
  165
  287
  592
  1,001
  1,534
  2,211
  3,051
  4,072
  5,288
  6,710
  8,347
  10,206
  12,289
  14,597
  17,127
  19,877
  22,843
  26,019
  29,401
  32,983
  36,762
  40,735
  44,898
  49,250
  53,792
  58,525
  63,452
  68,575
  73,902
  79,437
  85,189
Earnings before tax, $m
  1,184
  2,409
  3,589
  5,116
  7,042
  9,417
  12,282
  15,676
  19,625
  24,150
  29,263
  35,728
  42,025
  48,907
  56,363
  64,382
  72,951
  82,055
  91,683
  101,824
  112,470
  123,616
  135,260
  147,402
  160,047
  173,204
  186,885
  201,103
  215,879
  231,232
  247,189
Tax expense, $m
  404
  650
  969
  1,381
  1,901
  2,542
  3,316
  4,232
  5,299
  6,521
  7,901
  9,647
  11,347
  13,205
  15,218
  17,383
  19,697
  22,155
  24,754
  27,493
  30,367
  33,376
  36,520
  39,798
  43,213
  46,765
  50,459
  54,298
  58,287
  62,433
  66,741
Net income, $m
  780
  1,758
  2,620
  3,735
  5,141
  6,874
  8,966
  11,443
  14,326
  17,630
  21,362
  26,082
  30,678
  35,702
  41,145
  46,999
  53,254
  59,900
  66,929
  74,332
  82,103
  90,240
  98,739
  107,603
  116,834
  126,439
  136,426
  146,805
  157,591
  168,799
  180,448

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  858
  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
  24,140
  34,284
  49,019
  68,225
  92,626
  122,902
  159,673
  203,466
  254,708
  313,713
  380,687
  455,737
  538,876
  630,046
  729,132
  835,979
  950,412
  1,072,253
  1,201,328
  1,337,487
  1,480,606
  1,630,599
  1,787,421
  1,951,073
  2,121,600
  2,299,096
  2,483,702
  2,675,608
  2,875,045
  3,082,294
  3,297,674
Adjusted assets (=assets-cash), $m
  23,282
  34,284
  49,019
  68,225
  92,626
  122,902
  159,673
  203,466
  254,708
  313,713
  380,687
  455,737
  538,876
  630,046
  729,132
  835,979
  950,412
  1,072,253
  1,201,328
  1,337,487
  1,480,606
  1,630,599
  1,787,421
  1,951,073
  2,121,600
  2,299,096
  2,483,702
  2,675,608
  2,875,045
  3,082,294
  3,297,674
Revenue / Adjusted assets
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
  0.733
Average production assets, $m
  7,043
  10,379
  14,839
  20,654
  28,040
  37,206
  48,338
  61,595
  77,107
  94,970
  115,245
  137,965
  163,133
  190,733
  220,729
  253,075
  287,717
  324,602
  363,677
  404,896
  448,222
  493,630
  541,104
  590,646
  642,270
  696,003
  751,889
  809,984
  870,360
  933,100
  998,302
Working capital, $m
  -1,776
  -3,418
  -4,887
  -6,801
  -9,234
  -12,252
  -15,917
  -20,283
  -25,391
  -31,273
  -37,950
  -45,432
  -53,720
  -62,808
  -72,686
  -83,337
  -94,745
  -106,891
  -119,758
  -133,331
  -147,599
  -162,551
  -178,184
  -194,499
  -211,498
  -229,192
  -247,595
  -266,726
  -286,608
  -307,268
  -328,739
Total debt, $m
  8,506
  16,910
  28,595
  43,826
  63,175
  87,185
  116,344
  151,072
  191,706
  238,497
  291,608
  351,122
  417,052
  489,350
  567,924
  652,654
  743,400
  840,019
  942,376
  1,050,350
  1,163,843
  1,282,788
  1,407,148
  1,536,924
  1,672,152
  1,812,906
  1,959,299
  2,111,480
  2,269,634
  2,433,982
  2,604,779
Total liabilities, $m
  18,783
  27,187
  38,872
  54,103
  73,452
  97,462
  126,621
  161,349
  201,983
  248,774
  301,885
  361,399
  427,329
  499,627
  578,201
  662,931
  753,677
  850,296
  952,653
  1,060,627
  1,174,120
  1,293,065
  1,417,425
  1,547,201
  1,682,429
  1,823,183
  1,969,576
  2,121,757
  2,279,911
  2,444,259
  2,615,056
Total equity, $m
  5,357
  7,097
  10,147
  14,123
  19,173
  25,441
  33,052
  42,118
  52,724
  64,938
  78,802
  94,338
  111,547
  130,420
  150,930
  173,048
  196,735
  221,956
  248,675
  276,860
  306,485
  337,534
  369,996
  403,872
  439,171
  475,913
  514,126
  553,851
  595,134
  638,035
  682,619
Total liabilities and equity, $m
  24,140
  34,284
  49,019
  68,226
  92,625
  122,903
  159,673
  203,467
  254,707
  313,712
  380,687
  455,737
  538,876
  630,047
  729,131
  835,979
  950,412
  1,072,252
  1,201,328
  1,337,487
  1,480,605
  1,630,599
  1,787,421
  1,951,073
  2,121,600
  2,299,096
  2,483,702
  2,675,608
  2,875,045
  3,082,294
  3,297,675
Debt-to-equity ratio
  1.588
  2.380
  2.820
  3.100
  3.290
  3.430
  3.520
  3.590
  3.640
  3.670
  3.700
  3.720
  3.740
  3.750
  3.760
  3.770
  3.780
  3.780
  3.790
  3.790
  3.800
  3.800
  3.800
  3.810
  3.810
  3.810
  3.810
  3.810
  3.810
  3.810
  3.820
Adjusted equity ratio
  0.193
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207
  0.207

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  780
  1,758
  2,620
  3,735
  5,141
  6,874
  8,966
  11,443
  14,326
  17,630
  21,362
  26,082
  30,678
  35,702
  41,145
  46,999
  53,254
  59,900
  66,929
  74,332
  82,103
  90,240
  98,739
  107,603
  116,834
  126,439
  136,426
  146,805
  157,591
  168,799
  180,448
Depreciation, amort., depletion, $m
  168
  1,106
  1,254
  1,448
  1,694
  2,000
  2,371
  2,813
  3,330
  3,925
  4,601
  4,599
  5,438
  6,358
  7,358
  8,436
  9,591
  10,820
  12,123
  13,497
  14,941
  16,454
  18,037
  19,688
  21,409
  23,200
  25,063
  26,999
  29,012
  31,103
  33,277
Funds from operations, $m
  1,405
  2,864
  3,874
  5,183
  6,835
  8,874
  11,337
  14,256
  17,656
  21,555
  25,963
  30,680
  36,116
  42,060
  48,503
  55,435
  62,845
  70,720
  79,051
  87,828
  97,044
  106,694
  116,776
  127,291
  138,243
  149,639
  161,489
  173,805
  186,603
  199,903
  213,724
Change in working capital, $m
  -177
  -1,096
  -1,469
  -1,915
  -2,432
  -3,018
  -3,666
  -4,366
  -5,108
  -5,882
  -6,677
  -7,482
  -8,288
  -9,089
  -9,878
  -10,651
  -11,408
  -12,146
  -12,867
  -13,573
  -14,267
  -14,953
  -15,633
  -16,314
  -16,999
  -17,694
  -18,403
  -19,131
  -19,882
  -20,660
  -21,471
Cash from operations, $m
  1,582
  8,523
  5,343
  7,098
  9,268
  11,892
  15,003
  18,622
  22,764
  27,437
  32,640
  38,162
  44,404
  51,148
  58,380
  66,086
  74,252
  82,866
  91,919
  101,402
  111,311
  121,647
  132,410
  143,605
  155,243
  167,333
  179,892
  192,936
  206,485
  220,563
  235,195
Maintenance CAPEX, $m
  0
  -235
  -346
  -495
  -688
  -935
  -1,240
  -1,611
  -2,053
  -2,570
  -3,166
  -3,842
  -4,599
  -5,438
  -6,358
  -7,358
  -8,436
  -9,591
  -10,820
  -12,123
  -13,497
  -14,941
  -16,454
  -18,037
  -19,688
  -21,409
  -23,200
  -25,063
  -26,999
  -29,012
  -31,103
New CAPEX, $m
  -199
  -3,336
  -4,461
  -5,814
  -7,387
  -9,166
  -11,132
  -13,257
  -15,512
  -17,862
  -20,275
  -22,720
  -25,169
  -27,600
  -29,996
  -32,346
  -34,642
  -36,885
  -39,075
  -41,219
  -43,326
  -45,407
  -47,475
  -49,542
  -51,623
  -53,733
  -55,886
  -58,095
  -60,376
  -62,740
  -65,202
Cash from investing activities, $m
  -2,409
  -3,571
  -4,807
  -6,309
  -8,075
  -10,101
  -12,372
  -14,868
  -17,565
  -20,432
  -23,441
  -26,562
  -29,768
  -33,038
  -36,354
  -39,704
  -43,078
  -46,476
  -49,895
  -53,342
  -56,823
  -60,348
  -63,929
  -67,579
  -71,311
  -75,142
  -79,086
  -83,158
  -87,375
  -91,752
  -96,305
Free cash flow, $m
  -827
  4,952
  537
  789
  1,193
  1,792
  2,631
  3,753
  5,199
  7,004
  9,199
  11,601
  14,636
  18,111
  22,027
  26,383
  31,174
  36,391
  42,024
  48,060
  54,489
  61,299
  68,481
  76,027
  83,931
  92,191
  100,806
  109,777
  119,110
  128,811
  138,890
Issuance/(repayment) of debt, $m
  2,521
  8,713
  11,685
  15,231
  19,349
  24,010
  29,159
  34,728
  40,634
  46,791
  53,111
  59,514
  65,929
  72,298
  78,575
  84,730
  90,746
  96,619
  102,357
  107,974
  113,493
  118,945
  124,360
  129,776
  135,228
  140,754
  146,393
  152,181
  158,154
  164,348
  170,797
Issuance/(repurchase) of shares, $m
  -534
  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  
  1,963
  8,713
  11,685
  15,231
  19,349
  24,010
  29,159
  34,728
  40,634
  46,791
  53,111
  59,514
  65,929
  72,298
  78,575
  84,730
  90,746
  96,619
  102,357
  107,974
  113,493
  118,945
  124,360
  129,776
  135,228
  140,754
  146,393
  152,181
  158,154
  164,348
  170,797
Total cash flow (excl. dividends), $m
  1,136
  13,665
  12,222
  16,019
  20,542
  25,802
  31,790
  38,481
  45,833
  53,795
  62,310
  71,115
  80,566
  90,408
  100,601
  111,113
  121,920
  133,011
  144,380
  156,034
  167,982
  180,243
  192,841
  205,802
  219,159
  232,946
  247,199
  261,958
  277,264
  293,159
  309,687
Retained Cash Flow (-), $m
  -8,947
  -2,289
  -3,050
  -3,976
  -5,051
  -6,267
  -7,612
  -9,065
  -10,607
  -12,214
  -13,864
  -15,535
  -17,210
  -18,872
  -20,511
  -22,117
  -23,688
  -25,221
  -26,719
  -28,185
  -29,626
  -31,049
  -32,462
  -33,876
  -35,299
  -36,742
  -38,214
  -39,724
  -41,284
  -42,900
  -44,584
Prev. year cash balance distribution, $m
 
  549
  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
 
  11,925
  9,171
  12,044
  15,491
  19,534
  24,179
  29,416
  35,226
  41,581
  48,446
  55,580
  63,356
  71,536
  80,091
  88,995
  98,232
  107,790
  117,662
  127,849
  138,356
  149,195
  160,379
  171,926
  183,860
  196,204
  208,985
  222,234
  235,980
  250,258
  265,103
Discount rate, %
 
  8.20
  8.61
  9.04
  9.49
  9.97
  10.47
  10.99
  11.54
  12.12
  12.72
  13.36
  14.02
  14.73
  15.46
  16.24
  17.05
  17.90
  18.79
  19.73
  20.72
  21.76
  22.84
  23.99
  25.19
  26.45
  27.77
  29.16
  30.61
  32.15
  33.75
PV of cash for distribution, $m
 
  11,021
  7,775
  9,289
  10,778
  12,147
  13,307
  14,179
  14,705
  14,857
  14,629
  13,995
  13,116
  11,993
  10,701
  9,317
  7,915
  6,559
  5,300
  4,174
  3,201
  2,390
  1,735
  1,224
  838
  556
  357
  222
  133
  77
  43
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

Marriott International, Inc. operates, franchises, and licenses hotels and timeshare properties worldwide. The company operates through three segments: North American Full-Service, North American Limited-Service, and International. It also operates, markets, and develops residential properties, as well as provides services to home/condominium owner associations. The company operates its properties primarily under the brand names of Bulgari, The Ritz-Carlton and The Ritz-Carlton Reserve, St. Regis, W, EDITION, JW Marriott, The Luxury Collection, Marriott Hotels, Westin, Le Méridien, Renaissance Hotels, Sheraton, Delta Hotels by MarriottSM, Marriott Executive Apartments, Marriott Vacation Club, Autograph Collection Hotels, Tribute Portfolio™, Design Hotels™, Gaylord Hotels, Courtyard, Four Points by Sheraton, SpringHill Suites, Fairfield Inn & Suites, Residence Inn, TownePlace Suites, AC Hotels by Marriott, Aloft, Element, Moxy Hotels, and Protea Hotels by Marriott. As of February 15, 2017, it operated, franchised, and licensed approximately 6,000 properties in 122 countries and territories. Marriott International, Inc. was founded in 1971 and is headquartered in Bethesda, Maryland.

FINANCIAL RATIOS  of  Marriott International (MAR)

Valuation Ratios
P/E Ratio 51.5
Price to Sales 2.4
Price to Book 7.5
Price to Tangible Book
Price to Cash Flow 25.4
Price to Free Cash Flow 29.1
Growth Rates
Sales Growth Rate 17.9%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -34.8%
Cap. Spend. - 3 Yr. Gr. Rate -7.6%
Financial Strength
Quick Ratio 3
Current Ratio 0.1
LT Debt to Equity 153%
Total Debt to Equity 158.8%
Interest Coverage 8
Management Effectiveness
Return On Assets 5.9%
Ret/ On Assets - 3 Yr. Avg. 10.7%
Return On Total Capital 10.8%
Ret/ On T. Cap. - 3 Yr. Avg. 46.2%
Return On Equity 88.3%
Return On Equity - 3 Yr. Avg. 5.7%
Asset Turnover 1.1
Profitability Ratios
Gross Margin 15.4%
Gross Margin - 3 Yr. Avg. 14.8%
EBITDA Margin 8.9%
EBITDA Margin - 3 Yr. Avg. 9.6%
Operating Margin 8%
Oper. Margin - 3 Yr. Avg. 8.6%
Pre-Tax Margin 6.9%
Pre-Tax Margin - 3 Yr. Avg. 7.8%
Net Profit Margin 4.6%
Net Profit Margin - 3 Yr. Avg. 5.3%
Effective Tax Rate 34.1%
Eff/ Tax Rate - 3 Yr. Avg. 32.2%
Payout Ratio 47.9%

MAR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the MAR stock intrinsic value calculation we used $17072 million for the last fiscal year's total revenue generated by Marriott International. The default revenue input number comes from 2016 income statement of Marriott International. 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 MAR stock valuation model: a) initial revenue growth rate of 47.2% 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 8.2%, whose default value for MAR is calculated based on our internal credit rating of Marriott International, 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 Marriott International.
    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 MAR stock the variable cost ratio is equal to 90.7%.

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 MAR 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 3.5% for Marriott International.

Corporate tax rate of 27% is the nominal tax rate for Marriott International. 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 MAR 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 MAR are equal to 41.3%.

Life of production assets of 67.3 years is the average useful life of capital assets used in Marriott International 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 MAR is equal to -13.6%. 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 - $5357 million for Marriott International - 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 381.512 million for Marriott International 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 Marriott International at the current share price and the inputted number of shares is $39.7 billion.


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COMPANY NEWS

▶ Attention, Marriott customers: Your cancellation window just got shorter   [Jun-20-17 04:35PM  American City Business Journals]
▶ Reasons To Travel This July 4th Holiday   [Jun-19-17 12:20PM  PR Newswire]
▶ Why Marriott International, Inc. Shares Rose 14% in May   [Jun-17-17 03:45PM  Motley Fool]
▶ Toronto's Trump tower could get new name -sources   [Jun-16-17 04:35PM  Reuters]
▶ 5 Large Cap Stocks to Buy Now   [Jun-14-17 03:47PM  Zacks]
▶ Charlotte Marriott City Center hotel sells for $170 million   [11:16AM  American City Business Journals]
▶ The 2 Best Dividend Stocks in the Hotel Industry   [Jun-13-17 05:15PM  Motley Fool]
▶ [$$] Preferred Stock for the Long Run   [Jun-10-17 12:14AM  Barrons.com]
▶ Greater Baltimore remains without a Fortune 500 company as Under Armour creeps closer   [Jun-07-17 12:00PM  American City Business Journals]
▶ Douglas pitches hotel in Mount Vernon Triangle   [Jun-06-17 06:31PM  American City Business Journals]
▶ Trading travel stocks: 3 buys   [05:00PM  CNBC Videos]
▶ Autograph Collection Hotels Debuts In Portland, Oregon   [Jun-01-17 04:01PM  PR Newswire]
▶ [$$] Hotels Remove Welcome Mat for Online Travel Agencies   [May-28-17 09:21AM  The Wall Street Journal]
▶ Marriott CEO not scared by Denver's growing tidal wave of hotel rooms   [08:47AM  American City Business Journals]
▶ Hotel chains ditch traditional guest rooms   [May-23-17 02:26PM  CNBC Videos]
▶ [$$] AmerisourceBergen and AbbVie Top Barron's 500   [May-20-17 01:23AM  Barrons.com]
▶ 3 Top Hotel Stocks to Buy in 2017   [May-19-17 01:43PM  Motley Fool]
▶ Marriott Raises the Roof on Stock Prices   [May-18-17 03:39PM  TheStreet.com]
▶ How Marriott CEO Arne Sorenson says government can help businesses   [03:25PM  American City Business Journals]
▶ Why Online Travel Agents Should Fear Airbnb's Rise   [May-17-17 06:05AM  Motley Fool]
▶ These 3 Stocks Just Raised Their Dividends   [May-12-17 07:27PM  Motley Fool]
Stock chart of MAR Financial statements of MAR Annual reports of MAR
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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