Marriott International Inc Valuation – July 2016 $MAR

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today - June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Marriott International Inc (MAR) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Marriott International, Inc. is a lodging company. The Company is an operator, franchisor and licensor of hotels and timeshare properties in approximately 90 countries and territories under over 20 brand names. It also develops, operates and markets residential properties, and provides services to home or condominium owner associations. It operates through three segments: North American Full-Service, which includes brands, such as The Ritz-Carlton, EDITION, JW Marriott, Autograph Collection Hotels, Marriott Hotels, Delta Hotels and Resorts, and Renaissance Hotels located in the United States and Canada; North American Limited-Service, which includes brands, such as AC Hotels by Marriott, Courtyard, Residence Inn, SpringHill Suites, TownePlace Suites properties and Fairfield Inn & Suites located in the United States and Canada, and International, which includes brands, such as Bulgari Hotels & Resorts, Protea Hotels and Moxy Hotels located outside the United States and Canada.


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Downloadable PDF version of this valuation:

ModernGraham Valuation of MAR – July 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,831,870,037 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.44 Fail
3. Earnings Stability Positive EPS for 10 years prior Fail
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 434.48% Pass
6. Moderate PEmg Ratio PEmg < 20 24.00 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 -4.88 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 0.44 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.12 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

MAR value chart July 2016

EPSmg $2.93
MG Growth Estimate 15.00%
MG Value $112.91
Opinion Undervalued
MG Grade D+
MG Value based on 3% Growth $42.52
MG Value based on 0% Growth $24.93
Market Implied Growth Rate 7.75%
Current Price $70.39
% of Intrinsic Value 62.34%

Marriott International Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.9 in 2012 to an estimated $2.93 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.75% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Marriott International Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

MAR charts July 2016

Net Current Asset Value (NCAV) -$32.88
Graham Number $0.00
PEmg 24.00
Current Ratio 0.44
PB Ratio -4.88
Current Dividend $1.00
Dividend Yield 1.42%
Number of Consecutive Years of Dividend Growth 7


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Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Total Current Assets $1,424,000,000
Total Current Liabilities $3,247,000,000
Long-Term Debt $3,859,000,000
Total Assets $6,121,000,000
Intangible Assets $2,414,000,000
Total Liabilities $9,788,000,000
Shares Outstanding (Diluted Average) 254,400,000

Earnings Per Share History

Next Fiscal Year Estimate $3.61
Dec2015 $3.15
Dec2014 $2.54
Dec2013 $2.00
Dec2012 $1.72
Dec2011 $0.55
Dec2010 $1.21
Dec2009 -$0.97
Dec2008 $0.98
Dec2007 $1.73
Dec2006 $1.40
Dec2005 $1.43
Dec2004 $1.23
Dec2003 $1.01
Dec2002 $0.54
Dec2001 $0.46
Dec2000 $0.94
Dec1999 $0.75
Dec1998 $0.72
Dec1997 $0.59

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.93
Dec2015 $2.39
Dec2014 $1.88
Dec2013 $1.33
Dec2012 $0.90
Dec2011 $0.56
Dec2010 $0.66
Dec2009 $0.57
Dec2008 $1.34
Dec2007 $1.47
Dec2006 $1.26
Dec2005 $1.11
Dec2004 $0.91
Dec2003 $0.75
Dec2002 $0.64
Dec2001 $0.69
Dec2000 $0.73

Recommended Reading:

Other ModernGraham posts about the company

24 Companies in the Spotlight This Week – 3/28/15
Marriott International Inc. Annual Valuation – 2015 $MAR
17 Companies in the Spotlight This Week – 3/22/14
Marriott International (MAR) Annual Valuation – 2014

Other ModernGraham posts about related companies

Starwood Hotels & Resorts Worldwide Inc. Analysis – July 2015 Update $HOT
Carnival Corporation Annual Valuation – 2015 $CCL
Marriott International Inc. Annual Valuation – 2015 $MAR
Wyndham Worldwide Corporation Annual Valuation – 2014 $WYN
Starwood Hotels & Resorts Annual Valuation – 2014 $HOT
Carnival Corporation (CCL) Annual Valuation – 2014


The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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