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

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 12/1/2018
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.

Other ModernGraham posts about related companies

Carnival Corp Valuation – February 2019 $CCL
Marriott International Inc Valuation – January 2019 $MAR
Norwegian Cruise Line Holdings Ltd Valuation – January 2019 $NCLH
Wyndham Worldwide Corp Valuation – May 2018 $WYN
Carnival Corp Valuation – April 2018 $CCL
Marriott International Inc Valuation – March 2018 $MAR
Norwegian Cruise Line Holdings Ltd Valuation – Initial Coverage $NCLH
Wyndham Worldwide Corp Valuation – January 2017 $WYN
ILG Inc Valuation – Initial Coverage $ILG
Starwood Hotels & Resorts Worldwide Inc Valuation – August 2016 $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.

Royal Caribbean Cruises Ltd Valuation – March 2019 #RCL

Company Profile (excerpt from Reuters): Royal Caribbean Cruises Ltd., incorporated on July 23, 1985, is a cruise company. The Company owns and operates three global cruise brands: Royal Caribbean International, Celebrity Cruises and Azamara Club Cruises (Global Brands). The Company also own joint venture interest in the German brand TUI Cruises, interest in the Spanish brand Pullmantur and interest in the Chinese brand SkySea Cruises (collectively, Partner Brands). Together, its Global Brands and its Partner Brands operate a combined total of 50 ships in the cruise vacation industry with an aggregate capacity of approximately 123,270 berths, as of December 31, 2016. As of July 31, 2018, the Company’s ships offer a selection of itineraries that call on approximately 540 destinations in 105 countries, covering all seven continents.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of RCL – March 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 $24,317,988,750 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 0.17 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 396.93% Pass
6. Moderate PEmg Ratio PEmg < 20 14.42 Pass
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.20 Pass
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 0.17 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 -1.42 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 $8.06
MG Growth Estimate 15.00%
MG Value $310.46
Opinion Undervalued
MG Grade C
MG Value based on 3% Growth $116.93
MG Value based on 0% Growth $68.54
Market Implied Growth Rate 2.96%
Current Price $116.25
% of Intrinsic Value 37.44%

Royal Caribbean Cruises Ltd 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. 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 $2.54 in 2015 to an estimated $8.06 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.96% 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 Royal Caribbean Cruises Ltd revealed the company was trading above its Graham Number of $108.51. The company pays a dividend of $2.6 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 14.42, which was below the industry average of 31.69, 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 $-73.

Royal Caribbean Cruises Ltd receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$73.00
Graham Number $108.51
PEmg 14.42
Current Ratio 0.17
PB Ratio 2.20
Current Dividend $2.60
Dividend Yield 2.24%
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 12/1/2018
Total Current Assets $1,242,044,000
Total Current Liabilities $7,112,165,000
Long-Term Debt $8,355,370,000
Total Assets $27,698,270,000
Intangible Assets $1,378,353,000
Total Liabilities $16,592,809,000
Shares Outstanding (Diluted Average) 210,297,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $9.85
Dec2018 $8.56
Dec2017 $7.53
Dec2016 $5.93
Dec2015 $3.02
Dec2014 $3.43
Dec2013 $2.14
Dec2012 $0.08
Dec2011 $2.77
Dec2010 $2.37
Dec2009 $0.75
Dec2008 $2.68
Dec2007 $2.82
Dec2006 $2.94
Dec2005 $3.26
Dec2004 $2.26
Dec2003 $1.42
Dec2002 $1.79
Dec2001 $1.32
Dec2000 $2.31
Dec1999 $2.06

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $8.06
Dec2018 $6.68
Dec2017 $5.30
Dec2016 $3.76
Dec2015 $2.54
Dec2014 $2.26
Dec2013 $1.65
Dec2012 $1.52
Dec2011 $2.25
Dec2010 $2.10
Dec2009 $2.14
Dec2008 $2.82
Dec2007 $2.77
Dec2006 $2.61
Dec2005 $2.30
Dec2004 $1.82
Dec2003 $1.66

Recommended Reading:

Other ModernGraham posts about the company

Royal Caribbean Cruises Ltd Valuation – Initial Coverage June 2018 $RCL

Other ModernGraham posts about related companies

Hilton Worldwide Holdings Inc Valuation – February 2019 $HLT
Carnival Corp Valuation – February 2019 $CCL
Marriott International Inc Valuation – January 2019 $MAR
Norwegian Cruise Line Holdings Ltd Valuation – January 2019 $NCLH
Wyndham Worldwide Corp Valuation – May 2018 $WYN
Carnival Corp Valuation – April 2018 $CCL
Marriott International Inc Valuation – March 2018 $MAR
Norwegian Cruise Line Holdings Ltd Valuation – Initial Coverage $NCLH
Wyndham Worldwide Corp Valuation – January 2017 $WYN
ILG Inc Valuation – Initial Coverage $ILG

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.

5 New Books for Value Investors – October 2015

Recommended ReadingReading is very important for value investors.  In fact, it is one of the 7 Key Tips to Value Investing.  A great way to continually hone your investing strategies and pursue the greatest level of investing success is through frequently reading new literature.  To that end, here’s a list of 5 new books for value investors to consider adding to their reading list.

Be sure to check out the master list of all recommended reading from ModernGraham!

Here are the 5 New Books for Value Investors:

1.  Good Profit: How Creating Value for Others Built One of the World’s Most Successful Companies by Charles G. Koch

Excerpt from Amazon:

In 1961, Charles Koch joined his father’s Wichita-based company, then valued at $21 million. Six years later, he was named chairman of the board and CEO of Koch Industries, Inc. Today, Koch Industries’ estimated worth is $100 billion — making it one of the largest private companies in the world. Koch exceeds the S&P 500’s five-decade growth by 27-fold and plans to double its value on average every six years.
What exactly does this company do and why is it so remarkably profitable? Koch’s name may not be on your stain-resistant carpet, stretch denim jeans, the connectors in your smart phone, or your baby’s ultra-absorbent diapers but it makes them all. And Koch’s Market-Based Management® system is what drives these innovations and many more.

Based on five decades of interdisciplinary studies, experimental discovery, and practical implementation across Koch businesses worldwide, the core objective of MBM is to generate good profit. Good profit results from products and services that customers vote for freely with their dollars, products that improve people’s lives.  It results from a culture where employees are empowered to act entrepreneurially to discover customers’ preferences and the best ways to satisfy them. Good profit is what follows when long-term value is created for customers, employees, shareholders, and society.

Here, drawing on revealing, honest, and previously untold stories from his nearly six decades in business, Koch walks the reader through the five dimensions of MBM to show how to apply its framework to generate more good profit in any business, industry, or organization of any size.  Readers will learn how to:

  • Craft a vision for how to thrive in spite of increasingly rapid disruption
  • Select and retain a workforce possessing both virtue and talent
  • Create an environment of knowledge sharing that prizes respectful challenges from everyone at every level
  • Award employees with ownership and decision rights based on their proven contributions, not job title
  • Motivate all employees to maximize their contributions by structuring incentives so compensation is limited only by the value they create

A must-read for any leader, entrepreneur, or student, as well as anyone who wants a more civil, fair, and prosperous society, Good Profit is destined to rank as one of the greatest management books of all time.

2.  Superforecasting: The Art and Science of Prediction by Philip E. Tetlock and Dan Gardner

Excerpt from Amazon:

Everyone would benefit from seeing further into the future, whether buying stocks, crafting policy, launching a new product, or simply planning the week’s meals. Unfortunately, people tend to be terrible forecasters. As Wharton professor Philip Tetlock showed in a landmark 2005 study, even experts’ predictions are only slightly better than chance. However, an important and underreported conclusion of that study was that some experts do have real foresight, and Tetlock has spent the past decade trying to figure out why. What makes some people so good? And can this talent be taught?

In Superforecasting, Tetlock and coauthor Dan Gardner offer a masterwork on prediction, drawing on decades of research and the results of a massive, government-funded forecasting tournament. The Good Judgment Project involves tens of thousands of ordinary people—including a Brooklyn filmmaker, a retired pipe installer, and a former ballroom dancer—who set out to forecast global events. Some of the volunteers have turned out to be astonishingly good. They’ve beaten other benchmarks, competitors, and prediction markets. They’ve even beaten the collective judgment of intelligence analysts with access to classified information. They are “superforecasters.”

In this groundbreaking and accessible book, Tetlock and Gardner show us how we can learn from this elite group. Weaving together stories of forecasting successes (the raid on Osama bin Laden’s compound) and failures (the Bay of Pigs) and interviews with a range of high-level decision makers, from David Petraeus to Robert Rubin, they show that good forecasting doesn’t require powerful computers or arcane methods. It involves gathering evidence from a variety of sources, thinking probabilistically, working in teams, keeping score, and being willing to admit error and change course.Superforecasting offers the first demonstrably effective way to improve our ability to predict the future—whether in business, finance, politics, international affairs, or daily life—and is destined to become a modern classic.

3.  Fanatical Prospecting: The Ultimate Guide to Opening Sales Conversations and Filling the Pipeline by Leveraging Social Selling, Telephone, Email, Text, and Cold Calling by Jeb Blount

Excerpt from Amazon:

Fanatical Prospecting gives salespeople, sales leaders, entrepreneurs, and executives a practical, eye-opening guide that clearly explains the why and how behind the most important activity in sales and business development—prospecting.

The brutal fact is the number one reason for failure in sales is an empty pipe and the root cause of an empty pipeline is the failure to consistently prospect. By ignoring the muscle of prospecting, many otherwise competent salespeople and sales organizations consistently underperform.

Step by step, Jeb Blount outlines his innovative approach to prospecting that works for real people, in the real world, with real prospects.

Learn how to keep the pipeline full of qualified opportunities and avoid debilitating sales slumps by leveraging a balanced prospecting methodology across multiple prospecting channels.

This book reveals the secrets, techniques, and tips of top earners. You’ll learn:

  • Why the 30-Day Rule is critical for keeping the pipeline full
  • Why understanding the Law of Replacement is the key to avoiding sales slumps
  • How to leverage the Law of Familiarity to reduce prospecting friction and avoid rejection
  • The 5 C’s of Social Selling and how to use them to get prospects to call you
  • How to use the simple 5 Step Telephone Framework to get more appointments fast
  • How to double call backs with a powerful voice mail technique
  • How to leverage the powerful 4 Step Email Prospecting Framework to create emails that compel prospects to respond
  • How to get text working for you with the 7 Step Text Message Prospecting Framework
  • And there is so much more!

Fanatical Prospecting is filled with the high-powered strategies, techniques, and tools you need to fill your pipeline with high quality opportunities.

In the most comprehensive book ever written about sales prospecting, Jeb Blount reveals the real secret to improving sales productivity and growing your income fast. You’ll gain the power to blow through resistance and objections, gain more appointments, start more sales conversations, and close more sales.

Break free from the fear and frustration that is holding you and your team back from effective and consistent prospecting. It’s time to get off the feast or famine sales roller-coaster for good!

4.  #GIRLBOSS by Sophia Amoruso

Excerpt from Amazon:

In the New York Times bestseller that the Washington Post called “Lean In for misfits,” Sophia Amoruso shares how she went from dumpster diving to founding one of the fastest-growing retailers in the world.

Sophia Amoruso spent her teens hitchhiking, committing petty theft, and scrounging in dumpsters for leftover bagels. By age twenty-two she had dropped out of school, and was broke, directionless, and checking IDs in the lobby of an art school—
a job she’d taken for the health insurance. It was in that lobby that Sophia decided to start selling vintage clothes on eBay.

Flash forward ten years to today, and she’s the founder and executive chairman of Nasty Gal, a $250-million-plus fashion retailer with more than four hundred employees. Sophia was never a typical CEO, or a typical anything, and she’s written #GIRLBOSS for other girls like her: outsiders (and insiders) seeking a unique path to success, even when that path is windy as all hell and lined with naysayers.

#GIRLBOSS proves that being successful isn’t about where you went to college
or how popular you were in high school. It’s about trusting your instincts and following your gut; knowing which rules to follow and which to break; when to button up and when to let your freak flag fly.

5.  Humans of New York: Stories by Brandon Stanton

Excerpt from Amazon:

In the summer of 2010, photographer Brandon Stanton began an ambitious project -to single-handedly create a photographic census of New York City. The photos he took and the accompanying interviews became the blog Humans of New York. His audience steadily grew from a few hundred followers to, at present count, over fifteen million. In 2013, his book Humans of New York, based on that blog, was published and immediately catapulted to the top of the NY Times Bestseller List where it has appeared for over forty-five weeks. Now, Brandon is back with the Humans of New York book that his loyal followers have been waiting for: Humans of New York: Stories. Ever since Brandon began interviewing people on the streets of New York, the dialogue he’s had with them has increasingly become as in-depth, intriguing and moving as the photos themselves. Humans of New York: Stories presents a whole new group of people in stunning photographs, with a rich design and, most importantly, longer stories that delve deeper and surprise with greater candor. Let Brandon Stanton and the Humans of New York he’s photographed astonish you all over again this October.

What books do you recommend for fellow value investors?  Leave a comment below.

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