Is Expedia Group (NASDAQ:EXPE) a Hidden Gem? DCF Analysis Suggests a 50.6% Undervaluation

The Case for Expedia Group’s Undervaluation

Expedia Group (NASDAQ:EXPE) has long been a bellwether for the travel industry, and recent financial metrics suggest it may be significantly undervalued. According to a discounted cash flow (DCF) analysis, the stock is trading at a 50.6% discount to its intrinsic value of $415.53 per share, as of September 2025 [4]. With a current price of $214.95 [3], this discrepancy raises compelling questions for value-oriented investors.

Free Cash Flow: A Strong Foundation

Expedia’s latest twelve months (TTM) free cash flow (FCF) reached $1.95 billion, a figure projected to grow to $4.16 billion by 2035 [4]. This trajectory is underpinned by sustained recovery in global travel demand and the shift toward digital booking platforms. Analysts highlight that Expedia’s FCF yield of 7.4% far exceeds the S&P 500 median of 3.8%, signaling robust cash generation relative to its valuation [5]. Such metrics suggest the company is not only surviving the post-pandemic travel landscape but thriving within it.

DCF Assumptions: Sensitivity and Realism

The DCF model’s accuracy hinges on key assumptions, including the discount rate and terminal growth rate. For Expedia, the discount rate—often tied to the weighted average cost of capital (WACC)—varies across analyses. One model uses a WACC of 9.1% and a terminal growth rate of 3.1%, while another assumes a WACC of 8.2% and a terminal growth rate of 2.6% [2][4]. Even with these variations, the intrinsic value remains well above the current stock price. For instance, a conservative WACC of 13.38% and terminal growth rate of 2% still yield an implied share price of $209, which is 1.4% below the current price [5]. This sensitivity analysis underscores the robustness of the undervaluation thesis.

Market Realities and Investor Caution

Critics may argue that DCF models are inherently speculative, particularly for cyclical industries like travel. However, Expedia’s FCF projections are grounded in tangible trends: digital adoption, margin expansion, and disciplined cost management [5]. Moreover, the company’s 10-year FCF forecasts incorporate a terminal growth rate capped below GDP growth (3.00%) [3], ensuring prudence in long-term assumptions.

The Bottom Line

Expedia Group’s DCF-derived intrinsic value of $415.53 implies a substantial margin of safety for investors. With a current price of $214.95 [3], the stock appears to offer a rare combination of strong cash flow generation and a wide discount to fair value. While no model is infallible, the alignment of FCF growth, conservative discounting, and industry tailwinds makes a compelling case for Expedia as a potential undervalued opportunity.

Source:
[1] Expedia Group Inc (EXPE) DCF Valuation [https://www.gurufocus.com/stock/EXPE/dcf]
[2] Expedia Group, Inc. (EXPE) DCF Value | Stock Valuation [https://valuesense.io/ticker/expe/intrinsic-value-tools/dcf-calculator]
[3] Expedia Group, Inc. Common Stock (EXPE) Historical Quotes [https://www.nasdaq.com/market-activity/stocks/expe/historical]
[4] Can Expedia's Recent 8.4% Surge Signal More Upside Ahead in 2025? [https://simplywall.st/stocks/us/consumer-services/nasdaq-expe/expedia-group/news/can-expedias-recent-84-surge-signal-more-upside-ahead-in-2025-08-25]
[5] EXPE Is Producing Cash, What Is Holding You Back? [https://www.trefis.com/stock/expe/articles/573513/expe-is-producing-cash-what-is-holding-you-back/2025-08-25]