Stock Analysis on Net
Stock Analysis on Net

Booking Holdings Inc. (NASDAQ:BKNG)

Present Value of Free Cash Flow to the Firm (FCFF)

Microsoft Excel

In discounted cash flow (DCF) valuation techniques the value of the stock is estimated based upon present value of some measure of cash flow. Free cash flow to the firm (FCFF) is generally described as cash flows after direct costs and before any payments to capital suppliers.

Intrinsic Stock Value (Valuation Summary)

Booking Holdings Inc., free cash flow to the firm (FCFF) forecast

US$ in millions, except per share data

Microsoft Excel
Year Value FCFFt or Terminal value (TVt) Calculation Present value at 17.25%
01 FCFF0 8,663
1 FCFF1 10,397 = 8,663 × (1 + 20.02%) 8,868
2 FCFF2 12,261 = 10,397 × (1 + 17.92%) 8,919
3 FCFF3 14,201 = 12,261 × (1 + 15.83%) 8,810
4 FCFF4 16,151 = 14,201 × (1 + 13.73%) 8,546
5 FCFF5 18,030 = 16,151 × (1 + 11.63%) 8,137
5 Terminal value (TV5) 358,395 = 18,030 × (1 + 11.63%) ÷ (17.25% – 11.63%) 161,735
Intrinsic value of Booking Holdings Inc. capital 205,015
Less: Outstanding debt and finance lease liabilities (fair value) 18,833
Intrinsic value of Booking Holdings Inc. common stock 186,182
 
Intrinsic value of Booking Holdings Inc. common stock (per share) $5,673.64
Current share price $4,673.38

Based on: 10-K (reporting date: 2024-12-31).

1 See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.

Weighted Average Cost of Capital (WACC)

Booking Holdings Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 153,358 0.89 19.02%
Outstanding debt and finance lease liabilities (fair value) 18,833 0.11 2.80% = 3.54% × (1 – 20.91%)

Based on: 10-K (reporting date: 2024-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 32,815,201 × $4,673.38
= $153,357,904,049.38

   Outstanding debt and finance lease liabilities (fair value). See details »

2 Required rate of return on equity is estimated by using CAPM. See details »

   Required rate of return on debt. See details »

   Required rate of return on debt is after tax.

   Estimated (average) effective income tax rate
= (19.34% + 21.75% + 22.05% + 20.48% + 89.59%) ÷ 5
= 20.91%

WACC = 17.25%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Booking Holdings Inc., PRAT model

Microsoft Excel
Average Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Selected Financial Data (US$ in millions)
Interest expense 1,295 897 391 334 356
Net income 5,882 4,289 3,058 1,165 59
 
Effective income tax rate (EITR)1 19.34% 21.75% 22.05% 20.48% 89.59%
 
Interest expense, after tax2 1,045 702 305 266 37
Add: Dividends 1,187 — — — —
Interest expense (after tax) and dividends 2,232 702 305 266 37
 
EBIT(1 – EITR)3 6,927 4,991 3,363 1,431 96
 
Current finance lease liabilities 26 34 21 4 —
Short-term debt 1,745 1,961 500 1,989 985
Non-current finance lease liabilities 7 34 32 6 —
Long-term debt 14,853 12,223 11,985 8,937 11,029
Stockholders’ equity (deficit) (4,020) (2,744) 2,782 6,178 4,893
Total capital 12,611 11,508 15,320 17,114 16,907
Financial Ratios
Retention rate (RR)4 0.68 0.86 0.91 0.81 0.61
Return on invested capital (ROIC)5 54.92% 43.37% 21.95% 8.36% 0.57%
Averages
RR 0.78
ROIC 25.83%
 
FCFF growth rate (g)6 20.02%

Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).

1 See details »

2024 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 1,295 × (1 – 19.34%)
= 1,045

3 EBIT(1 – EITR) = Net income + Interest expense, after tax
= 5,882 + 1,045
= 6,927

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [6,927 – 2,232] ÷ 6,927
= 0.68

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 6,927 ÷ 12,611
= 54.92%

6 g = RR × ROIC
= 0.78 × 25.83%
= 20.02%

FCFF growth rate (g) implied by single-stage model

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (172,191 × 17.25% – 8,663) ÷ (172,191 + 8,663)
= 11.63%

where:

Total capital, fair value0 = current fair value of Booking Holdings Inc. debt and equity (US$ in millions)
FCFF0 = the last year Booking Holdings Inc. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Booking Holdings Inc. capital

FCFF growth rate (g) forecast

Booking Holdings Inc., H-model

Microsoft Excel
Year Value gt
1 g1 20.02%
2 g2 17.92%
3 g3 15.83%
4 g4 13.73%
5 and thereafter g5 11.63%

where:
g1 is implied by PRAT model
g5 is implied by single-stage model
g2, g3 and g4 are calculated using linear interpolation between g1 and g5

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 20.02% + (11.63% – 20.02%) × (2 – 1) ÷ (5 – 1)
= 17.92%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 20.02% + (11.63% – 20.02%) × (3 – 1) ÷ (5 – 1)
= 15.83%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 20.02% + (11.63% – 20.02%) × (4 – 1) ÷ (5 – 1)
= 13.73%