Hilton Worldwide Holdings Inc Valuation – February 2019 $HLT

Company Profile (excerpt from Reuters): Hilton Worldwide Holdings Inc., incorporated on March 18, 2010, is a hospitality company. The Company is engaged in owning, leasing, managing and franchising hotels and resorts. The Company’s segments include ownership, and management and franchise. As of December 31, 2016, the Company owned, leased, managed or franchised 4,875 hotel and resort properties, totaling 796,440 rooms in 104 countries and territories. Its brand portfolio includes Hilton Hotels & Resorts, Waldorf Astoria Hotels & Resorts, Conrad Hotels & Resorts, Canopy by Hilton, Curio-A Collection by Hilton, DoubleTree by Hilton, Embassy Suites by Hilton, Hilton Garden Inn, Hampton by Hilton, Tru by Hilton, Homewood Suites by Hilton and Home2 Suites by Hilton.


Downloadable PDF version of this valuation:

ModernGraham Valuation of HLT – February 2019

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 $23,940,242,250 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.76 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 281.62% Pass
6. Moderate PEmg Ratio PEmg < 20 29.32 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 43.81 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 0.76 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -11.50 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 $2.79
MG Growth Estimate 2.12%
MG Value $35.55
Opinion Overvalued
MG Grade D
MG Value based on 3% Growth $40.44
MG Value based on 0% Growth $23.70
Market Implied Growth Rate 10.41%
Current Price $81.75
% of Intrinsic Value 229.93%

Hilton Hotels Corporation Common Stock 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, poor dividend history, 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 Overvalued after growing its EPSmg (normalized earnings) from $2.44 in 2015 to an estimated $2.79 for 2019. This level of demonstrated earnings growth does not support the market’s implied estimate of 10.41% 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 below the price.

At the time of valuation, further research into Hilton Hotels Corporation Common Stock revealed the company was trading above its Graham Number of $11.44. The company pays a dividend of $0.6 per share, for a yield of 0.7% Its PEmg (price over earnings per share – ModernGraham) was 29.32, which was below the industry average of 31.44, 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 $-38.31.

Hilton Hotels Corporation Common Stock 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) -$38.31
Graham Number $11.44
PEmg 29.32
Current Ratio 0.76
PB Ratio 43.81
Current Dividend $0.60
Dividend Yield 0.73%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Total Current Assets $1,983,000,000
Total Current Liabilities $2,615,000,000
Long-Term Debt $7,266,000,000
Total Assets $13,995,000,000
Intangible Assets $11,316,000,000
Total Liabilities $13,437,000,000
Shares Outstanding (Diluted Average) 299,000,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.11
Dec2018 $2.50
Dec2017 $3.32
Dec2016 $1.03
Dec2015 $4.26
Dec2014 $2.05
Dec2013 $1.35
Dec2012 $1.14
Dec2011 $0.81
Dec2010 $0.39

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.79
Dec2018 $2.63
Dec2017 $2.60
Dec2016 $2.15
Dec2015 $2.44
Dec2014 $1.41
Dec2013 $0.97
Dec2012 $0.67
Dec2011 $0.37
Dec2010 $0.13

Recommended Reading:

Other ModernGraham posts about the company

None. This is the first time ModernGraham has covered the company.

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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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