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By: Allie Leon. Market Multiple Valuation. The Lodging Industry. $ 592.6 B total industry revenue in 2013 H it hard by recession, but on the recovery Intense competition due to low barriers to entry and threat of substitution Major global players are Marriott and Hilton
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By: Allie Leon Market Multiple Valuation
The Lodging Industry • $592.6 B total industry revenue in 2013 • Hit hard by recession, but on the recovery • Intense competition due to low barriers to entry and threat of substitution • Major global players are Marriott and Hilton • Marriott owns 3900 properties in 72 countries • Comprised of 19 brands
Use of Multiples in Company Valuation Pros: -widely used -easily understood by the general public -gives you an idea of where the company stands in the industry -helps you compare firms Cons: -lots of judgment and estimations -hard to determine comparable companies
NEA Multiple Notes: - Excluded Hyatt from industry averages -much smaller than the other competitors -differences in company capital structures will not affect NEA calculations like they do for BV
EPAT Multiple Notes: -still excluded Hyatt -use EPAT because dividends are paid out of earnings, and potential dividends are the basis for company value -companies that generate more earnings should be worth more -more reliable than NI multiple
NI Multiple Notes: -still exclude Hyatt -difference between NI and EPAT multiples is the weights put on debt -approach produces the value of equity, not of the enterprise
RevPAR Notes: -still exclude Hyatt -performance metric in the hotel industry -hard to determine which revenue was from room verse other sources –possible source of error
RecommendationSELL • Market price at close of day 1/24/14 = $49.76 • Values excluding Hyatt were significantly below this price (with the exception of RevPAR) • Stock is overvalued – expect it to underperform the market • Conclusion: SELL
Sources • Marriott International, Inc. 2012 Annual Report • Yahoo Finance