Stock Analysis on Net
Stock Analysis on Net

Hilton Worldwide Holdings Inc. (NYSE:HLT)

This company has been moved to the archive! The financial data has not been updated since August 7, 2024.

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)

Hilton Worldwide 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 14.37%
01 FCFF0 2,010
1 FCFF1 2,171 = 2,010 × (1 + 8.02%) 1,898
2 FCFF2 2,359 = 2,171 × (1 + 8.66%) 1,803
3 FCFF3 2,579 = 2,359 × (1 + 9.31%) 1,724
4 FCFF4 2,835 = 2,579 × (1 + 9.96%) 1,657
5 FCFF5 3,136 = 2,835 × (1 + 10.60%) 1,603
5 Terminal value (TV5) 92,157 = 3,136 × (1 + 10.60%) ÷ (14.37% – 10.60%) 47,101
Intrinsic value of Hilton Worldwide Holdings Inc. capital 55,787
Less: Long-term debt (fair value) 8,908
Intrinsic value of Hilton Worldwide Holdings Inc. common stock 46,879
 
Intrinsic value of Hilton Worldwide Holdings Inc. common stock (per share) $190.23
Current share price $203.52

Based on: 10-K (reporting date: 2023-12-31).

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)

Hilton Worldwide Holdings Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 50,153 0.85 16.22%
Long-term debt (fair value) 8,908 0.15 3.91% = 5.40% × (1 – 27.53%)

Based on: 10-K (reporting date: 2023-12-31).

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 246,427,097 × $203.52
= $50,152,842,781.44

   Long-term debt (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
= (31.97% + 27.51% + 27.32% + 22.08% + 28.78%) ÷ 5
= 27.53%

WACC = 14.37%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Hilton Worldwide Holdings Inc., PRAT model

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Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Interest expense 464 415 397 429 414
Net income (loss) attributable to Hilton stockholders 1,141 1,255 410 (715) 881
 
Effective income tax rate (EITR)1 31.97% 27.51% 27.32% 22.08% 28.78%
 
Interest expense, after tax2 316 301 289 334 295
Add: Dividends 158 123 — 42 173
Interest expense (after tax) and dividends 474 424 289 376 468
 
EBIT(1 – EITR)3 1,457 1,556 699 (381) 1,176
 
Current maturities of long-term debt 39 39 54 56 37
Long-term debt, excluding current maturities 9,157 8,708 8,712 10,431 7,956
Total Hilton stockholders’ deficit (2,360) (1,102) (821) (1,490) (482)
Total capital 6,836 7,645 7,945 8,997 7,511
Financial Ratios
Retention rate (RR)4 0.67 0.73 0.59 — 0.60
Return on invested capital (ROIC)5 21.31% 20.35% 8.79% -4.23% 15.66%
Averages
RR 0.65
ROIC 12.38%
 
FCFF growth rate (g)6 8.02%

Based on: 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), 10-K (reporting date: 2019-12-31).

1 See details »

2023 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 464 × (1 – 31.97%)
= 316

3 EBIT(1 – EITR) = Net income (loss) attributable to Hilton stockholders + Interest expense, after tax
= 1,141 + 316
= 1,457

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [1,457 – 474] ÷ 1,457
= 0.67

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 1,457 ÷ 6,836
= 21.31%

6 g = RR × ROIC
= 0.65 × 12.38%
= 8.02%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (59,061 × 14.37% – 2,010) ÷ (59,061 + 2,010)
= 10.60%

where:

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

FCFF growth rate (g) forecast

Hilton Worldwide Holdings Inc., H-model

Microsoft Excel
Year Value gt
1 g1 8.02%
2 g2 8.66%
3 g3 9.31%
4 g4 9.96%
5 and thereafter g5 10.60%

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

Calculations

g2 = g1 + (g5 – g1) × (2 – 1) ÷ (5 – 1)
= 8.02% + (10.60% – 8.02%) × (2 – 1) ÷ (5 – 1)
= 8.66%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 8.02% + (10.60% – 8.02%) × (3 – 1) ÷ (5 – 1)
= 9.31%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 8.02% + (10.60% – 8.02%) × (4 – 1) ÷ (5 – 1)
= 9.96%