DCF Studio

    HLT · NYQ · Consumer Cyclical

    Hilton Worldwide Holdings Inc.

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 143.82

    Market price

    USD 305.73

    Implied upside

    -53.0%

    5-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case

    Current EV/EBITDA of 28.2x sits outside a defensible 3-20x band, so the exit multiple is capped at 20.0x. A multiple that far out usually means EBITDA is the wrong denominator for this business.

    Value Per Share

    Perpetuity growth
    USD 143.82-53.0%
    Exit multiple
    USD 284.57-6.9%
    Market price
    USD 305.73

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn2bn5bnFY26FY27FY28FY29FY30
    Nominal FCFFDiscounted to todayUSD
    LineFY26FY27FY28FY29FY30CAGR
    RevenueUSD 13.4bnUSD 14.9bnUSD 16.5bnUSD 18.4bnUSD 20.4bn+11.1%
    EBITUSD 3.0bnUSD 3.3bnUSD 3.7bnUSD 4.1bnUSD 4.6bn+11.1%
    NOPATUSD 2.4bnUSD 2.6bnUSD 2.9bnUSD 3.2bnUSD 3.6bn+11.1%
    Add depreciation & amortisationUSD 202.7mUSD 225.2mUSD 250.3mUSD 278.1mUSD 309.1m+11.1%
    Less capital expenditureUSD -230.3mUSD -255.9mUSD -284.3mUSD -316.0mUSD -351.1m+11.1%
    Less increase in working capitalUSD 806.2mUSD 895.9mUSD 995.6mUSD 1.1bnUSD 1.2bn-11.1%
    Free cashflow to firmUSD 3.1bnUSD 3.5bnUSD 3.9bnUSD 4.3bnUSD 4.8bn+11.1%
    Discount factor0.95510.87120.79480.72500.6613-
    Present valueUSD 3.0bnUSD 3.0bnUSD 3.1bnUSD 3.1bnUSD 3.2bn+1.4%
    Present Value Of The ForecastUSD 15.4bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate5.00%US 10-year Treasury (^TNX)
    Equity risk premium5.50%Market assumption
    Beta1.038Reported 1.056, pulled toward 1.0 (Blume)
    Cost of equity10.70%Risk-free + beta x equity risk premium
    Cost of debt5.00%Floored at the risk-free rate (implied cost of debt was lower)
    Market capitalisationUSD 68.8bn84.0% of capital
    Total debtUSD 13.1bn16.0% of capital, book value as a proxy
    Tax rate21.0%Effective, capped at statutory
    WACC9.62%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 143.82

    67% of EV

    Forecast FCFF, final year
    USD 4.8bn
    Capex at depreciation, working capital in reinvestment
    USD 3.6bn
    Less reinvestment at g/ROIC (9.7% of NOPAT)
    USD -351.4m
    Capitalised
    USD 3.3bn
    ROIC (reported)
    25.7%
    Terminal value, undiscounted
    USD 46.8bn
    Terminal value, discounted
    USD 31.0bn
    Enterprise value
    USD 46.4bn
    Less net debt
    USD 12.2bn
    Equity value
    USD 34.2bn

    Exit at 20.0x EBITDA

    Value per shareUSD 284.57

    81% of EV

    Terminal value, undiscounted
    USD 97.5bn
    Terminal value, discounted
    USD 64.5bn
    Enterprise value
    USD 79.9bn
    Less net debt
    USD 12.2bn
    Equity value
    USD 67.7bn

    Spread between methods: 66%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.62%186.69198.85213.35230.95252.75
    8.62%155.30163.48172.97184.10197.37
    9.62%131.57137.30143.82151.29159.95
    10.62%112.98117.13121.76126.99132.91
    11.62%98.01101.08104.48108.24112.45

    Outlined: this model. Green text: above today's price of 305.73. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputModelImpliedGap
    Revenue growth, every year11.1%25.3%+14.2pp
    EBIT margin22.4%42.6%+20.3pp
    Discount rate9.6%6.2%-3.4pp
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.