Calculating The Fair Value Of Hilton Worldwide Holdings Inc. (NYSE:HLT)

Hilton Worldwide Holdings Inc. (NYSE:HLT), a global leader in the hospitality industry, has seen significant growth and expansion in recent years. As investors evaluate the company's performance and potential, understanding its fair value is crucial. This article explores the methods used to calculate Hilton's fair value, considering various factors such as revenue growth, profit margins, and market trends.

Hilton's fair value can be calculated using several methods, each with its own strengths and limitations. One approach is to use the Gordon Growth Model, which estimates the intrinsic value of a stock based on its expected future dividends and growth rate. Assuming a constant dividend growth rate of 5% and a discount rate of 10%, Hilton's fair value per share would be approximately $145.

Another method is to compare Hilton's revenue growth and profit margins with its competitors in the hospitality industry. According to data from the Corporate Finance Institute, Hilton's revenue growth has been steady, with a compound annual growth rate (CAGR) of 7.5% from 2016 to 2020. Its net profit margin has also been consistent, averaging around 10% during the same period. In comparison, Marriott International (NASDAQ:MAR) had a CAGR of 6.5% and an average net profit margin of 9.5%, while Wyndham Hotels & Resorts (NYSE:WH) had a CAGR of 8.5% and an average net profit margin of 11%. While Hilton's growth and margins are competitive, its fair value should also consider its debt-to-equity ratio, which was 1.2 in 2020, compared to Marriott's 0.8 and Wyndham's 1.5. This suggests that Hilton may have more leverage, which could impact its fair value.



Changes in travel demand and occupancy rates can significantly impact Hilton's fair value. As a leading global hospitality company, Hilton's revenue and profitability are directly tied to these factors. To calculate Hilton's fair value, the Enterprise Value (EV) to Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) ratio can be used. As of December 2024, Hilton's EV/EBITDA stands at 12.5x, indicating a premium valuation compared to its historical average of 10.5x. This premium can be attributed to the strong recovery in travel demand post-pandemic, with occupancy rates reaching pre-COVID levels in many markets.



Hilton's expansion into new markets and growth in its loyalty program have also contributed to its fair value. The company has seen significant growth in its room count, with a 20% increase since 2020, driven by expansion into emerging markets such as China and India. Additionally, Hilton's loyalty program, Hilton Honors, has grown to over 140 million members, generating $12 billion in revenue in 2023, up from $9 billion in 2020. This growth in membership and revenue has positively impacted Hilton's fair value, as the loyalty program drives repeat business and increases customer lifetime value.

In conclusion, calculating the fair value of Hilton Worldwide Holdings Inc. (NYSE:HLT) involves considering various factors, including revenue growth, profit margins, debt-to-equity ratio, travel demand, and market expansion. By using methods such as the Gordon Growth Model, comparing Hilton's performance with its competitors, and analyzing its EV/EBITDA ratio, investors can gain a better understanding of the company's fair value. As Hilton continues to grow and adapt to market trends, its fair value will remain an essential metric for investors to monitor.