Company ProfileÂ (excerpt from Reuters): Marriott International, Inc. (Marriott International), incorporated on September 19, 1997, is a lodging company. As of December 31, 2017, the Company operated, franchised, or licensed 6,520 properties across the world, with 1,257,666 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, 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, 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:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass 6 out of the following 7 tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$37,827,905,491||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||1363.29%||Pass|
|6. Moderate PEmg Ratio||PEmg < 20||28.80||Fail|
|7. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||16.73||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||-2.68||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
|MG Growth Estimate||15.00%|
|MG Value based on 3% Growth||$55.83|
|MG Value based on 0% Growth||$32.73|
|Market Implied Growth Rate||10.15%|
|% of Intrinsic Value||74.81%|
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 $1.88 in 2014 to an estimated $3.85 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 10.15% 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 above the price.
At the time of valuation, further research into Marriott International Inc revealed the company was trading above its Graham Number of $35.23. The company pays a dividend of $1.29 per share, for a yield of 1.2% Its PEmg (price over earnings per share – ModernGraham) was 28.8, which was below the industry average of 29.4, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-53.35.
Marriott International Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.
Stage 3: Information for Further Research
|Net Current Asset Value (NCAV)||-$53.35|
|Number of Consecutive Years of Dividend Growth||8|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||9/1/2018|
|Total Current Assets||$2,803,000,000|
|Total Current Liabilities||$6,051,000,000|
|Shares Outstanding (Diluted Average)||350,600,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$5.31|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$3.85|
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The author did not hold aÂ position in any company mentioned in this articleÂ at the time of publication and had no intention of changing that position within the next 72 hours. Â See my current holdings here. Â This article is not investment advice; any reader should speak to aÂ registeredÂ investment adviser prior to making any investment decisions. Â ModernGraham is not affiliated with the company in any manner. Â Please be sure to review our detailed disclaimer.