Intrinsic value of Hyatt Hotels Corporation - H

Previous Close

$74.64

  Intrinsic Value

$10.83

stock screener

  Rating & Target

str. sell

-85%

Previous close

$74.64

 
Intrinsic value

$10.83

 
Up/down potential

-85%

 
Rating

str. sell

We calculate the intrinsic value of H 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 0001), $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 7.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  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
  4,543
  4,648
  4,767
  4,901
  5,050
  5,213
  5,390
  5,582
  5,789
  6,012
  6,249
  6,503
  6,773
  7,060
  7,365
  7,687
  8,029
  8,390
  8,772
  9,175
  9,600
  10,049
  10,522
  11,020
  11,544
  12,097
  12,678
  13,290
  13,933
  14,610
Variable operating expenses, $m
  4,278
  4,374
  4,484
  4,608
  4,745
  4,895
  5,058
  5,236
  5,426
  5,631
  5,759
  5,993
  6,242
  6,506
  6,787
  7,084
  7,399
  7,732
  8,084
  8,455
  8,847
  9,260
  9,696
  10,155
  10,639
  11,148
  11,683
  12,247
  12,840
  13,464
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
  4,278
  4,374
  4,484
  4,608
  4,745
  4,895
  5,058
  5,236
  5,426
  5,631
  5,759
  5,993
  6,242
  6,506
  6,787
  7,084
  7,399
  7,732
  8,084
  8,455
  8,847
  9,260
  9,696
  10,155
  10,639
  11,148
  11,683
  12,247
  12,840
  13,464
Operating income, $m
  265
  274
  283
  293
  305
  318
  332
  347
  363
  381
  490
  510
  531
  554
  578
  603
  630
  658
  688
  720
  753
  788
  825
  865
  906
  949
  995
  1,043
  1,093
  1,146
EBITDA, $m
  664
  680
  697
  717
  738
  762
  788
  816
  846
  879
  914
  951
  990
  1,032
  1,077
  1,124
  1,174
  1,227
  1,283
  1,341
  1,404
  1,469
  1,538
  1,611
  1,688
  1,769
  1,854
  1,943
  2,037
  2,136
Interest expense (income), $m
  75
  88
  93
  98
  103
  110
  117
  125
  133
  143
  153
  163
  175
  187
  200
  214
  228
  244
  260
  278
  296
  316
  336
  358
  380
  404
  430
  456
  484
  514
  545
Earnings before tax, $m
  177
  181
  185
  190
  195
  201
  207
  214
  221
  228
  327
  335
  344
  354
  364
  375
  386
  398
  410
  424
  438
  452
  468
  484
  501
  519
  538
  558
  579
  601
Tax expense, $m
  48
  49
  50
  51
  53
  54
  56
  58
  60
  62
  88
  91
  93
  96
  98
  101
  104
  107
  111
  114
  118
  122
  126
  131
  135
  140
  145
  151
  156
  162
Net income, $m
  129
  132
  135
  139
  143
  147
  151
  156
  161
  166
  239
  245
  251
  258
  266
  274
  282
  290
  300
  309
  319
  330
  341
  353
  366
  379
  393
  408
  423
  439

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $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 assets, $m
  7,793
  7,972
  8,177
  8,407
  8,662
  8,941
  9,246
  9,575
  9,930
  10,312
  10,719
  11,154
  11,618
  12,110
  12,632
  13,186
  13,772
  14,391
  15,046
  15,738
  16,467
  17,236
  18,047
  18,902
  19,801
  20,749
  21,746
  22,795
  23,899
  25,061
Adjusted assets (=assets-cash), $m
  7,793
  7,972
  8,177
  8,407
  8,662
  8,941
  9,246
  9,575
  9,930
  10,312
  10,719
  11,154
  11,618
  12,110
  12,632
  13,186
  13,772
  14,391
  15,046
  15,738
  16,467
  17,236
  18,047
  18,902
  19,801
  20,749
  21,746
  22,795
  23,899
  25,061
Revenue / Adjusted assets
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
  0.583
Average production assets, $m
  4,248
  4,345
  4,457
  4,583
  4,721
  4,874
  5,040
  5,220
  5,413
  5,621
  5,843
  6,080
  6,333
  6,601
  6,886
  7,188
  7,507
  7,845
  8,202
  8,579
  8,976
  9,396
  9,838
  10,303
  10,794
  11,310
  11,854
  12,426
  13,028
  13,661
Working capital, $m
  -432
  -442
  -453
  -466
  -480
  -495
  -512
  -530
  -550
  -571
  -594
  -618
  -643
  -671
  -700
  -730
  -763
  -797
  -833
  -872
  -912
  -955
  -1,000
  -1,047
  -1,097
  -1,149
  -1,204
  -1,263
  -1,324
  -1,388
Total debt, $m
  1,713
  1,806
  1,913
  2,032
  2,165
  2,310
  2,469
  2,640
  2,825
  3,023
  3,235
  3,461
  3,702
  3,958
  4,230
  4,518
  4,822
  5,145
  5,485
  5,845
  6,224
  6,624
  7,046
  7,490
  7,958
  8,450
  8,969
  9,515
  10,089
  10,693
Total liabilities, $m
  4,052
  4,145
  4,252
  4,371
  4,504
  4,649
  4,808
  4,979
  5,164
  5,362
  5,574
  5,800
  6,041
  6,297
  6,569
  6,857
  7,161
  7,484
  7,824
  8,184
  8,563
  8,963
  9,385
  9,829
  10,297
  10,789
  11,308
  11,854
  12,428
  13,032
Total equity, $m
  3,740
  3,826
  3,925
  4,035
  4,158
  4,292
  4,438
  4,596
  4,767
  4,950
  5,145
  5,354
  5,576
  5,813
  6,063
  6,329
  6,610
  6,908
  7,222
  7,554
  7,904
  8,273
  8,663
  9,073
  9,505
  9,959
  10,438
  10,942
  11,472
  12,029
Total liabilities and equity, $m
  7,792
  7,971
  8,177
  8,406
  8,662
  8,941
  9,246
  9,575
  9,931
  10,312
  10,719
  11,154
  11,617
  12,110
  12,632
  13,186
  13,771
  14,392
  15,046
  15,738
  16,467
  17,236
  18,048
  18,902
  19,802
  20,748
  21,746
  22,796
  23,900
  25,061
Debt-to-equity ratio
  0.460
  0.470
  0.490
  0.500
  0.520
  0.540
  0.560
  0.570
  0.590
  0.610
  0.630
  0.650
  0.660
  0.680
  0.700
  0.710
  0.730
  0.740
  0.760
  0.770
  0.790
  0.800
  0.810
  0.830
  0.840
  0.850
  0.860
  0.870
  0.880
  0.890
Adjusted equity ratio
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480
  0.480

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  129
  132
  135
  139
  143
  147
  151
  156
  161
  166
  239
  245
  251
  258
  266
  274
  282
  290
  300
  309
  319
  330
  341
  353
  366
  379
  393
  408
  423
  439
Depreciation, amort., depletion, $m
  399
  406
  414
  423
  433
  444
  456
  469
  483
  498
  423
  441
  459
  478
  499
  521
  544
  568
  594
  622
  650
  681
  713
  747
  782
  820
  859
  900
  944
  990
Funds from operations, $m
  528
  538
  549
  562
  576
  591
  607
  625
  644
  665
  662
  686
  710
  737
  765
  794
  826
  859
  894
  931
  970
  1,011
  1,054
  1,100
  1,148
  1,199
  1,252
  1,308
  1,367
  1,429
Change in working capital, $m
  -8
  -10
  -11
  -13
  -14
  -15
  -17
  -18
  -20
  -21
  -23
  -24
  -26
  -27
  -29
  -31
  -32
  -34
  -36
  -38
  -40
  -43
  -45
  -47
  -50
  -52
  -55
  -58
  -61
  -64
Cash from operations, $m
  537
  548
  561
  575
  590
  606
  624
  643
  664
  686
  685
  710
  736
  764
  794
  825
  858
  893
  930
  969
  1,010
  1,054
  1,099
  1,147
  1,198
  1,251
  1,307
  1,366
  1,428
  1,493
Maintenance CAPEX, $m
  -302
  -308
  -315
  -323
  -332
  -342
  -353
  -365
  -378
  -392
  -407
  -423
  -441
  -459
  -478
  -499
  -521
  -544
  -568
  -594
  -622
  -650
  -681
  -713
  -747
  -782
  -820
  -859
  -900
  -944
New CAPEX, $m
  -85
  -98
  -112
  -125
  -139
  -152
  -166
  -180
  -194
  -208
  -222
  -237
  -252
  -268
  -285
  -302
  -319
  -338
  -357
  -377
  -398
  -419
  -442
  -466
  -491
  -516
  -544
  -572
  -602
  -633
Cash from investing activities, $m
  -387
  -406
  -427
  -448
  -471
  -494
  -519
  -545
  -572
  -600
  -629
  -660
  -693
  -727
  -763
  -801
  -840
  -882
  -925
  -971
  -1,020
  -1,069
  -1,123
  -1,179
  -1,238
  -1,298
  -1,364
  -1,431
  -1,502
  -1,577
Free cash flow, $m
  150
  143
  134
  126
  119
  112
  105
  99
  92
  86
  55
  49
  43
  37
  31
  24
  18
  11
  5
  -2
  -9
  -16
  -24
  -31
  -39
  -47
  -56
  -65
  -74
  -84
Issuance/(repayment) of debt, $m
  79
  93
  107
  120
  133
  145
  158
  171
  185
  198
  212
  226
  241
  256
  272
  288
  305
  322
  340
  359
  379
  400
  422
  444
  468
  493
  519
  546
  574
  604
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  2
  9
  16
  0
  0
  0
  0
  0
  0
  0
  7
  15
  23
  31
  39
  48
  57
  66
  76
  86
  96
  107
  118
Cash from financing (excl. dividends), $m  
  79
  93
  107
  120
  133
  145
  158
  173
  194
  214
  212
  226
  241
  256
  272
  288
  305
  329
  355
  382
  410
  439
  470
  501
  534
  569
  605
  642
  681
  722
Total cash flow (excl. dividends), $m
  229
  236
  241
  246
  251
  257
  263
  272
  286
  301
  267
  275
  284
  293
  302
  312
  323
  341
  360
  380
  401
  423
  446
  470
  495
  521
  548
  577
  607
  638
Retained Cash Flow (-), $m
  -70
  -86
  -98
  -110
  -122
  -134
  -146
  -158
  -170
  -183
  -196
  -209
  -222
  -236
  -251
  -266
  -281
  -297
  -314
  -332
  -350
  -369
  -389
  -410
  -432
  -455
  -479
  -504
  -530
  -557
Prev. year cash balance distribution, $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 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
  158
  150
  142
  136
  129
  123
  117
  114
  116
  118
  71
  66
  61
  56
  51
  46
  41
  43
  46
  48
  51
  54
  57
  60
  63
  66
  70
  73
  77
  81
Discount rate, %
  4.60
  4.83
  5.07
  5.33
  5.59
  5.87
  6.16
  6.47
  6.80
  7.14
  7.49
  7.87
  8.26
  8.67
  9.11
  9.56
  10.04
  10.54
  11.07
  11.62
  12.21
  12.82
  13.46
  14.13
  14.84
  15.58
  16.36
  17.17
  18.03
  18.93
PV of cash for distribution, $m
  151
  136
  123
  110
  98
  87
  77
  69
  64
  59
  32
  27
  22
  18
  14
  11
  8
  7
  6
  5
  5
  4
  3
  2
  2
  2
  1
  1
  1
  0
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  99.9
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.7
  99.6
  99.4
  99.2
  99.0
  98.7
  98.4
  98.1
  97.8
  97.4
  97.0
  96.5
  96.1

Hyatt Hotels Corporation is a global hospitality company. The Company develops, owns, operates, manages, franchises, licenses or provides services to a portfolio of properties. The Company operates through four segments: owned and leased hotels; Americas management and franchising (Americas); ASPAC management and franchising (ASPAC), and EAME/SW Asia management and franchising (EAME/SW Asia). The owned and leased hotels segment consists of its owned and leased full service and select service hotels. The Americas segment consists of its management and franchising of properties located in the United States, Latin America, Canada and the Caribbean. The ASPAC segment consists of its management and franchising of properties located in Southeast Asia, as well as China, Australia, South Korea, Japan and Micronesia. The EAME/SW Asia segment consists of its management and franchising of properties located in Europe, Africa, the Middle East, India, Central Asia and Nepal.

FINANCIAL RATIOS  of  Hyatt Hotels Corporation (H)

Valuation Ratios
P/E Ratio 47.9
Price to Sales 2.2
Price to Book 2.5
Price to Tangible Book
Price to Cash Flow 20
Price to Free Cash Flow 35.1
Growth Rates
Sales Growth Rate 2.3%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -21.6%
Cap. Spend. - 3 Yr. Gr. Rate -1.9%
Financial Strength
Quick Ratio 5
Current Ratio 0.1
LT Debt to Equity 37%
Total Debt to Equity 40.1%
Interest Coverage 5
Management Effectiveness
Return On Assets 3.3%
Ret/ On Assets - 3 Yr. Avg. 3.4%
Return On Total Capital 3.8%
Ret/ On T. Cap. - 3 Yr. Avg. 3.9%
Return On Equity 5.2%
Return On Equity - 3 Yr. Avg. 5.1%
Asset Turnover 0.6
Profitability Ratios
Gross Margin 21.6%
Gross Margin - 3 Yr. Avg. 21.9%
EBITDA Margin 15.9%
EBITDA Margin - 3 Yr. Avg. 17%
Operating Margin 6.8%
Oper. Margin - 3 Yr. Avg. 6.6%
Pre-Tax Margin 6.5%
Pre-Tax Margin - 3 Yr. Avg. 7.6%
Net Profit Margin 4.6%
Net Profit Margin - 3 Yr. Avg. 5.1%
Effective Tax Rate 29.4%
Eff/ Tax Rate - 3 Yr. Avg. 33.2%
Payout Ratio 0%

H stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the H stock intrinsic value calculation we used $4454 million for the last fiscal year's total revenue generated by Hyatt Hotels Corporation. The default revenue input number comes from 0001 income statement of Hyatt Hotels Corporation. 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 H 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 4.6%, whose default value for H is calculated based on our internal credit rating of Hyatt Hotels Corporation, 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 Hyatt Hotels Corporation.
    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 H stock the variable cost ratio is equal to 94.2%.

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 H 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 5.4% for Hyatt Hotels Corporation.

Corporate tax rate of 27% is the nominal tax rate for Hyatt Hotels Corporation. 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 H 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 H are equal to 93.5%.

Life of production assets of 13.8 years is the average useful life of capital assets used in Hyatt Hotels Corporation 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 H is equal to -9.5%. 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 - $3670 million for Hyatt Hotels Corporation - 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 105.830 million for Hyatt Hotels Corporation 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 Hyatt Hotels Corporation at the current share price and the inputted number of shares is $7.9 billion.

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