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 15.47%
01 FCFF0 7,658
1 FCFF1 9,047 = 7,658 × (1 + 18.14%) 7,835
2 FCFF2 10,484 = 9,047 × (1 + 15.89%) 7,863
3 FCFF3 11,914 = 10,484 × (1 + 13.64%) 7,739
4 FCFF4 13,271 = 11,914 × (1 + 11.39%) 7,465
5 FCFF5 14,483 = 13,271 × (1 + 9.14%) 7,055
5 Terminal value (TV5) 249,563 = 14,483 × (1 + 9.14%) ÷ (15.47% – 9.14%) 121,575
Intrinsic value of Booking Holdings Inc. capital 159,532
Less: Outstanding debt and finance lease liabilities (fair value) 15,268
Intrinsic value of Booking Holdings Inc. common stock 144,264
 
Intrinsic value of Booking Holdings Inc. common stock (per share) $4,221.83
Current share price $3,414.82

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)

Booking Holdings Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 116,688 0.88 17.14%
Outstanding debt and finance lease liabilities (fair value) 15,268 0.12 2.72% = 3.43% × (1 – 20.66%)

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
= 34,171,027 × $3,414.82
= $116,687,906,420.14

   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
= (21.75% + 22.05% + 20.48% + 89.59% + 18.35%) ÷ 5
= 20.66%

WACC = 15.47%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Booking Holdings Inc., PRAT model

Microsoft Excel
Average Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020 Dec 31, 2019
Selected Financial Data (US$ in millions)
Interest expense 897 391 334 356 266
Net income 4,289 3,058 1,165 59 4,865
 
Effective income tax rate (EITR)1 21.75% 22.05% 20.48% 89.59% 18.35%
 
Interest expense, after tax2 702 305 266 37 217
Interest expense (after tax) and dividends 702 305 266 37 217
 
EBIT(1 – EITR)3 4,991 3,363 1,431 96 5,082
 
Current finance lease liabilities 34 21 4 — —
Short-term debt 1,961 500 1,989 985 988
Non-current finance lease liabilities 34 32 6 — —
Long-term debt 12,223 11,985 8,937 11,029 7,640
Stockholders’ equity (deficit) (2,744) 2,782 6,178 4,893 5,933
Total capital 11,508 15,320 17,114 16,907 14,561
Financial Ratios
Retention rate (RR)4 0.86 0.91 0.81 0.61 0.96
Return on invested capital (ROIC)5 43.37% 21.95% 8.36% 0.57% 34.90%
Averages
RR 0.83
ROIC 21.83%
 
FCFF growth rate (g)6 18.14%

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)
= 897 × (1 – 21.75%)
= 702

3 EBIT(1 – EITR) = Net income + Interest expense, after tax
= 4,289 + 702
= 4,991

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [4,991 – 702] ÷ 4,991
= 0.86

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 4,991 ÷ 11,508
= 43.37%

6 g = RR × ROIC
= 0.83 × 21.83%
= 18.14%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (131,956 × 15.47% – 7,658) ÷ (131,956 + 7,658)
= 9.14%

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 18.14%
2 g2 15.89%
3 g3 13.64%
4 g4 11.39%
5 and thereafter g5 9.14%

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)
= 18.14% + (9.14% – 18.14%) × (2 – 1) ÷ (5 – 1)
= 15.89%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 18.14% + (9.14% – 18.14%) × (3 – 1) ÷ (5 – 1)
= 13.64%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 18.14% + (9.14% – 18.14%) × (4 – 1) ÷ (5 – 1)
= 11.39%