Marriott International Inc Valuation – March 2018 $MAR

Company Profile (excerpt from Reuters): Marriott International, Inc. (Marriott International), incorporated on September 19, 1997, is a lodging company. As of December 31, 2016, the Company operated, franchised, or licensed 6,080 properties across the world, with 1,190,604 rooms. Marriott International operates in three business segments: North American Full-Service, North American Limited-Service and International. Its North American Full-Service segment includes its Luxury and Premium brands (JW Marriott, The Ritz-Carlton, W Hotels, The Luxury Collection, St. Regis, EDITION, Marriott Hotels, Sheraton, Westin, Renaissance Hotels, Le Meridien, Autograph Collection Hotels, Delta Hotels, Gaylord Hotels, and Tribute Portfolio) located in the United States and Canada. Its North American Limited-Service segment includes Select brands (Courtyard, Residence Inn, Fairfield Inn & Suites, SpringHill Suites, Four Points, TownePlace Suites, Aloft Hotels, AC Hotels by Marriott, Element Hotels, and Moxy Hotels) located in the United States and Canada. Its International segment includes JW Marriott, The Ritz-Carlton, W Hotels, The Luxury Collection, St. Regis, EDITION, Bulgari Hotels & Resorts, Marriott Hotels, Sheraton, Westin, Renaissance Hotels, Le Meridien, Autograph Collection Hotels, Marriott Executive Apartments, Tribute Portfolio, Courtyard, Residence Inn, Fairfield Inn & Suites, Four Points, Aloft Hotels, AC Hotels by Marriott, Protea Hotels, Element Hotels, and Moxy Hotels located outside the United States and Canada. It also operates, markets, and develops residential properties and provides services to home/condominium owner associations.

MAR Chart

MAR data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of MAR – March 2018

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 $49,359,337,039 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.46 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 1345.57% Pass
6. Moderate PEmg Ratio PEmg < 20 35.75 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 13.49 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 0.46 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -2.40 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

EPSmg $3.80
MG Growth Estimate 15.00%
MG Value $146.43
Opinion Fairly Valued
MG Grade D
MG Value based on 3% Growth $55.15
MG Value based on 0% Growth $32.33
Market Implied Growth Rate 13.63%
Current Price $135.98
% of Intrinsic Value 92.86%

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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.88 in 2014 to an estimated $3.8 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 13.63% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into Marriott International Inc revealed the company was trading above its Graham Number of $34.77. The company pays a dividend of $1.29 per share, for a yield of 0.9% Its PEmg (price over earnings per share – ModernGraham) was 35.75, which was above the industry average of 29.67. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-47.22.

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

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$47.22
Graham Number $34.77
PEmg 35.75
Current Ratio 0.46
PB Ratio 13.49
Current Dividend $1.29
Dividend Yield 0.95%
Number of Consecutive Years of Dividend Growth 8

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $2,747,000,000
Total Current Liabilities $6,010,000,000
Long-Term Debt $7,840,000,000
Total Assets $23,948,000,000
Intangible Assets $18,012,000,000
Total Liabilities $20,217,000,000
Shares Outstanding (Diluted Average) 370,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.17
Dec2017 $3.61
Dec2016 $2.64
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 $0.93
Dec1999 $0.74
Dec1998 $0.72

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.80
Dec2017 $3.01
Dec2016 $2.61
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

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

Wyndham Worldwide Corp Valuation – January 2017 $WYN
ILG Inc Valuation – Initial Coverage $ILG
Starwood Hotels & Resorts Worldwide Inc Valuation – August 2016 $HOT
Carnival Corp Valuation – July 2016 $CCL
Marriott International Inc Valuation – July 2016 $MAR
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

Disclaimer:

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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