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.
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 |
Useful Links:
| ModernGraham tagged articles | Morningstar |
| Google Finance | MSN Money |
| Yahoo Finance | Seeking Alpha |
| GuruFocus | SEC Filings |
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:
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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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