Intrinsic value of TripAdvisor, Inc. - TRIP

Previous Close

$46.75

  Intrinsic Value

$57.47

stock screener

  Rating & Target

buy

+23%

Previous close

$46.75

 
Intrinsic value

$57.47

 
Up/down potential

+23%

 
Rating

buy

We calculate the intrinsic value of TRIP 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 6.5

 

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, %
  7.80
  7.52
  7.27
  7.04
  6.84
  6.65
  6.49
  6.34
  6.21
  6.08
  5.98
  5.88
  5.79
  5.71
  5.64
  5.58
  5.52
  5.47
  5.42
  5.38
  5.34
  5.31
  5.28
  5.25
  5.22
  5.20
  5.18
  5.16
  5.15
  5.13
Revenue, $m
  1,741
  1,872
  2,008
  2,149
  2,296
  2,449
  2,608
  2,773
  2,945
  3,125
  3,311
  3,506
  3,709
  3,921
  4,142
  4,373
  4,614
  4,867
  5,130
  5,406
  5,695
  5,997
  6,314
  6,645
  6,992
  7,356
  7,737
  8,136
  8,555
  8,994
Variable operating expenses, $m
  314
  331
  348
  367
  386
  405
  426
  448
  470
  493
  430
  455
  482
  509
  538
  568
  599
  632
  666
  702
  740
  779
  820
  863
  908
  955
  1,005
  1,057
  1,111
  1,168
Fixed operating expenses, $m
  1,197
  1,223
  1,250
  1,277
  1,306
  1,334
  1,364
  1,394
  1,424
  1,456
  1,488
  1,520
  1,554
  1,588
  1,623
  1,659
  1,695
  1,732
  1,771
  1,810
  1,849
  1,890
  1,932
  1,974
  2,018
  2,062
  2,107
  2,154
  2,201
  2,249
Total operating expenses, $m
  1,511
  1,554
  1,598
  1,644
  1,692
  1,739
  1,790
  1,842
  1,894
  1,949
  1,918
  1,975
  2,036
  2,097
  2,161
  2,227
  2,294
  2,364
  2,437
  2,512
  2,589
  2,669
  2,752
  2,837
  2,926
  3,017
  3,112
  3,211
  3,312
  3,417
Operating income, $m
  231
  318
  410
  505
  605
  709
  818
  932
  1,051
  1,176
  1,394
  1,530
  1,673
  1,824
  1,981
  2,146
  2,320
  2,502
  2,693
  2,895
  3,106
  3,328
  3,562
  3,808
  4,066
  4,338
  4,625
  4,926
  5,243
  5,576
EBITDA, $m
  394
  488
  585
  687
  793
  904
  1,020
  1,141
  1,268
  1,400
  1,539
  1,684
  1,836
  1,995
  2,163
  2,338
  2,522
  2,715
  2,918
  3,132
  3,356
  3,591
  3,839
  4,099
  4,373
  4,661
  4,964
  5,282
  5,618
  5,971
Interest expense (income), $m
  10
  0
  6
  12
  18
  24
  31
  37
  44
  52
  60
  68
  76
  85
  94
  103
  113
  124
  134
  146
  158
  170
  183
  196
  211
  225
  241
  257
  274
  292
  311
Earnings before tax, $m
  231
  313
  398
  488
  581
  679
  781
  887
  999
  1,116
  1,326
  1,454
  1,589
  1,730
  1,878
  2,033
  2,196
  2,368
  2,548
  2,737
  2,936
  3,145
  3,366
  3,597
  3,841
  4,097
  4,367
  4,651
  4,951
  5,265
Tax expense, $m
  62
  84
  108
  132
  157
  183
  211
  240
  270
  301
  358
  393
  429
  467
  507
  549
  593
  639
  688
  739
  793
  849
  909
  971
  1,037
  1,106
  1,179
  1,256
  1,337
  1,422
Net income, $m
  168
  228
  291
  356
  424
  495
  570
  648
  729
  815
  968
  1,062
  1,160
  1,263
  1,371
  1,484
  1,603
  1,728
  1,860
  1,998
  2,143
  2,296
  2,457
  2,626
  2,804
  2,991
  3,188
  3,396
  3,614
  3,844

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
  2,039
  2,192
  2,351
  2,517
  2,689
  2,868
  3,054
  3,247
  3,449
  3,659
  3,877
  4,105
  4,343
  4,591
  4,850
  5,121
  5,403
  5,699
  6,007
  6,331
  6,669
  7,022
  7,393
  7,781
  8,187
  8,613
  9,059
  9,527
  10,018
  10,532
Adjusted assets (=assets-cash), $m
  2,039
  2,192
  2,351
  2,517
  2,689
  2,868
  3,054
  3,247
  3,449
  3,659
  3,877
  4,105
  4,343
  4,591
  4,850
  5,121
  5,403
  5,699
  6,007
  6,331
  6,669
  7,022
  7,393
  7,781
  8,187
  8,613
  9,059
  9,527
  10,018
  10,532
Revenue / Adjusted assets
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
  0.854
Average production assets, $m
  756
  812
  871
  933
  997
  1,063
  1,132
  1,204
  1,278
  1,356
  1,437
  1,522
  1,610
  1,702
  1,798
  1,898
  2,003
  2,112
  2,227
  2,346
  2,472
  2,603
  2,740
  2,884
  3,035
  3,192
  3,358
  3,531
  3,713
  3,903
Working capital, $m
  -160
  -172
  -185
  -198
  -211
  -225
  -240
  -255
  -271
  -287
  -305
  -323
  -341
  -361
  -381
  -402
  -425
  -448
  -472
  -497
  -524
  -552
  -581
  -611
  -643
  -677
  -712
  -749
  -787
  -827
Total debt, $m
  54
  111
  169
  230
  293
  359
  428
  499
  573
  650
  731
  815
  902
  994
  1,089
  1,188
  1,292
  1,401
  1,515
  1,634
  1,758
  1,888
  2,025
  2,167
  2,317
  2,474
  2,638
  2,810
  2,990
  3,180
Total liabilities, $m
  750
  807
  865
  926
  989
  1,055
  1,124
  1,195
  1,269
  1,346
  1,427
  1,511
  1,598
  1,690
  1,785
  1,884
  1,988
  2,097
  2,211
  2,330
  2,454
  2,584
  2,721
  2,863
  3,013
  3,170
  3,334
  3,506
  3,686
  3,876
Total equity, $m
  1,288
  1,385
  1,486
  1,591
  1,699
  1,812
  1,930
  2,052
  2,180
  2,312
  2,451
  2,595
  2,745
  2,902
  3,065
  3,236
  3,415
  3,602
  3,797
  4,001
  4,215
  4,438
  4,672
  4,918
  5,174
  5,444
  5,726
  6,021
  6,331
  6,656
Total liabilities and equity, $m
  2,038
  2,192
  2,351
  2,517
  2,688
  2,867
  3,054
  3,247
  3,449
  3,658
  3,878
  4,106
  4,343
  4,592
  4,850
  5,120
  5,403
  5,699
  6,008
  6,331
  6,669
  7,022
  7,393
  7,781
  8,187
  8,614
  9,060
  9,527
  10,017
  10,532
Debt-to-equity ratio
  0.040
  0.080
  0.110
  0.140
  0.170
  0.200
  0.220
  0.240
  0.260
  0.280
  0.300
  0.310
  0.330
  0.340
  0.360
  0.370
  0.380
  0.390
  0.400
  0.410
  0.420
  0.430
  0.430
  0.440
  0.450
  0.450
  0.460
  0.470
  0.470
  0.480
Adjusted equity ratio
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632
  0.632

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  168
  228
  291
  356
  424
  495
  570
  648
  729
  815
  968
  1,062
  1,160
  1,263
  1,371
  1,484
  1,603
  1,728
  1,860
  1,998
  2,143
  2,296
  2,457
  2,626
  2,804
  2,991
  3,188
  3,396
  3,614
  3,844
Depreciation, amort., depletion, $m
  164
  169
  175
  182
  188
  195
  202
  209
  217
  224
  145
  154
  163
  172
  182
  192
  202
  213
  225
  237
  250
  263
  277
  291
  307
  322
  339
  357
  375
  394
Funds from operations, $m
  332
  398
  466
  538
  612
  690
  772
  857
  946
  1,039
  1,113
  1,215
  1,322
  1,435
  1,552
  1,676
  1,806
  1,942
  2,085
  2,235
  2,393
  2,559
  2,734
  2,917
  3,110
  3,314
  3,527
  3,752
  3,989
  4,238
Change in working capital, $m
  -12
  -12
  -13
  -13
  -14
  -14
  -15
  -15
  -16
  -16
  -17
  -18
  -19
  -19
  -20
  -21
  -22
  -23
  -24
  -25
  -27
  -28
  -29
  -30
  -32
  -33
  -35
  -37
  -39
  -40
Cash from operations, $m
  344
  410
  479
  551
  626
  704
  786
  872
  962
  1,056
  1,130
  1,233
  1,341
  1,454
  1,573
  1,697
  1,828
  1,965
  2,109
  2,260
  2,420
  2,587
  2,763
  2,948
  3,142
  3,347
  3,562
  3,789
  4,027
  4,278
Maintenance CAPEX, $m
  -71
  -76
  -82
  -88
  -94
  -101
  -107
  -114
  -122
  -129
  -137
  -145
  -154
  -163
  -172
  -182
  -192
  -202
  -213
  -225
  -237
  -250
  -263
  -277
  -291
  -307
  -322
  -339
  -357
  -375
New CAPEX, $m
  -54
  -57
  -59
  -61
  -64
  -66
  -69
  -72
  -75
  -78
  -81
  -84
  -88
  -92
  -96
  -100
  -105
  -109
  -114
  -120
  -125
  -131
  -137
  -144
  -151
  -158
  -165
  -173
  -182
  -191
Cash from investing activities, $m
  -125
  -133
  -141
  -149
  -158
  -167
  -176
  -186
  -197
  -207
  -218
  -229
  -242
  -255
  -268
  -282
  -297
  -311
  -327
  -345
  -362
  -381
  -400
  -421
  -442
  -465
  -487
  -512
  -539
  -566
Free cash flow, $m
  219
  277
  338
  401
  468
  537
  610
  686
  765
  849
  912
  1,004
  1,099
  1,200
  1,305
  1,415
  1,531
  1,653
  1,781
  1,916
  2,057
  2,206
  2,363
  2,527
  2,700
  2,883
  3,075
  3,276
  3,489
  3,713
Issuance/(repayment) of debt, $m
  54
  56
  59
  61
  63
  66
  68
  71
  74
  77
  80
  84
  87
  91
  95
  100
  104
  109
  114
  119
  124
  130
  136
  143
  150
  157
  164
  172
  180
  189
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
Cash from financing (excl. dividends), $m  
  54
  56
  59
  61
  63
  66
  68
  71
  74
  77
  80
  84
  87
  91
  95
  100
  104
  109
  114
  119
  124
  130
  136
  143
  150
  157
  164
  172
  180
  189
Total cash flow (excl. dividends), $m
  273
  333
  396
  462
  531
  603
  678
  757
  840
  926
  993
  1,087
  1,187
  1,291
  1,400
  1,515
  1,635
  1,762
  1,895
  2,035
  2,182
  2,336
  2,499
  2,670
  2,850
  3,039
  3,239
  3,449
  3,669
  3,902
Retained Cash Flow (-), $m
  -94
  -97
  -101
  -105
  -109
  -113
  -118
  -122
  -127
  -133
  -138
  -144
  -150
  -157
  -164
  -171
  -179
  -187
  -195
  -204
  -214
  -224
  -234
  -245
  -257
  -269
  -282
  -296
  -310
  -325
Prev. year cash balance distribution, $m
  277
  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
  456
  236
  295
  358
  422
  490
  561
  635
  712
  793
  854
  943
  1,036
  1,134
  1,236
  1,344
  1,457
  1,575
  1,700
  1,830
  1,968
  2,113
  2,265
  2,425
  2,593
  2,770
  2,957
  3,153
  3,360
  3,577
Discount rate, %
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
  437
  216
  257
  294
  327
  356
  379
  397
  409
  416
  406
  403
  394
  381
  363
  342
  317
  290
  262
  233
  204
  175
  148
  123
  101
  81
  63
  49
  37
  27
Current shareholders' claim on cash, %
  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

TripAdvisor, Inc. owns and operates a portfolio of online travel brands. TripAdvisor, the Company's brand, is a travel site. The Company operates through two segments: Hotel and Non-Hotel. The Company's Hotel segment includes click-based advertising and transaction; display-based and subscription-based advertising, and other hotel operations. The Non-Hotel segment includes Attractions, Restaurants and Vacation Rentals businesses. The Company's platform also enables users to compare real-time pricing and availability for these experiences, as well as to book hotels, flights, cruises, vacation rentals, tours, activities and attractions, and restaurants, on either a TripAdvisor site or application, or a travel partner site or application. As of December 31, 2016, the Company's TripAdvisor-branded Websites included tripadvisor.com in the United States and localized versions of the TripAdvisor Website in 48 markets and 28 languages around the world.

FINANCIAL RATIOS  of  TripAdvisor, Inc. (TRIP)

Valuation Ratios
P/E Ratio 56.1
Price to Sales 4.6
Price to Book 4.5
Price to Tangible Book
Price to Cash Flow 21
Price to Free Cash Flow 27.1
Growth Rates
Sales Growth Rate -0.8%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -33.9%
Cap. Spend. - 3 Yr. Gr. Rate 5.5%
Financial Strength
Quick Ratio 9
Current Ratio 0
LT Debt to Equity 6.1%
Total Debt to Equity 11.4%
Interest Coverage 16
Management Effectiveness
Return On Assets 5.9%
Ret/ On Assets - 3 Yr. Avg. 9.8%
Return On Total Capital 7.3%
Ret/ On T. Cap. - 3 Yr. Avg. 12.3%
Return On Equity 8.2%
Return On Equity - 3 Yr. Avg. 15.5%
Asset Turnover 0.7
Profitability Ratios
Gross Margin 95.2%
Gross Margin - 3 Yr. Avg. 96%
EBITDA Margin 17.7%
EBITDA Margin - 3 Yr. Avg. 24%
Operating Margin 11.2%
Oper. Margin - 3 Yr. Avg. 18.5%
Pre-Tax Margin 10.2%
Pre-Tax Margin - 3 Yr. Avg. 17.4%
Net Profit Margin 8.1%
Net Profit Margin - 3 Yr. Avg. 13.2%
Effective Tax Rate 20.5%
Eff/ Tax Rate - 3 Yr. Avg. 22.5%
Payout Ratio 0%

TRIP stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the TRIP stock intrinsic value calculation we used $1615 million for the last fiscal year's total revenue generated by TripAdvisor, Inc.. The default revenue input number comes from 0001 income statement of TripAdvisor, Inc.. 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 TRIP stock valuation model: a) initial revenue growth rate of 7.8% 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 4.3%, whose default value for TRIP is calculated based on our internal credit rating of TripAdvisor, Inc., 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 TripAdvisor, Inc..
    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 TRIP stock the variable cost ratio is equal to 18.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $1171 million in the base year in the intrinsic value calculation for TRIP 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 10.4% for TripAdvisor, Inc..

Corporate tax rate of 27% is the nominal tax rate for TripAdvisor, Inc.. 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 TRIP 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 TRIP are equal to 43.4%.

Life of production assets of 9.9 years is the average useful life of capital assets used in TripAdvisor, Inc. 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 TRIP is equal to -9.2%. 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 - $1471 million for TripAdvisor, Inc. - 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 138.205 million for TripAdvisor, Inc. 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 TripAdvisor, Inc. at the current share price and the inputted number of shares is $6.5 billion.

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