Stock Analysis on Net
Stock Analysis on Net

Expedia Group Inc. (NASDAQ:EXPE)

This company has been moved to the archive! The financial data has not been updated since May 3, 2022.

Present Value of Free Cash Flow to Equity (FCFE)

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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 equity (FCFE) is generally described as cash flows available to the equity holder after payments to debt holders and after allowing for expenditures to maintain the company asset base.

Intrinsic Stock Value (Valuation Summary)

Expedia Group Inc., free cash flow to equity (FCFE) forecast

US$ in millions, except per share data

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Year Value FCFEt or Terminal value (TVt) Calculation Present value at 18.87%
01 FCFE0 3,075
1 FCFE1 2,638 = 3,075 × (1 + -14.20%) 2,220
2 FCFE2 2,391 = 2,638 × (1 + -9.36%) 1,693
3 FCFE3 2,283 = 2,391 × (1 + -4.52%) 1,360
4 FCFE4 2,291 = 2,283 × (1 + 0.33%) 1,148
5 FCFE5 2,409 = 2,291 × (1 + 5.17%) 1,015
5 Terminal value (TV5) 18,502 = 2,409 × (1 + 5.17%) ÷ (18.87% – 5.17%) 7,797
Intrinsic value of Expedia Group Inc. common stock 15,232
 
Intrinsic value of Expedia Group Inc. common stock (per share) $96.96
Current share price $150.31

Based on: 10-K (reporting date: 2021-12-31).

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.

Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 4.85%
Expected rate of return on market portfolio2 E(RM) 13.46%
Systematic risk of Expedia Group Inc. common stock βEXPE 1.63
 
Required rate of return on Expedia Group Inc. common stock3 rEXPE 18.87%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rEXPE = RF + βEXPE [E(RM) – RF]
= 4.85% + 1.63 [13.46% – 4.85%]
= 18.87%

FCFE Growth Rate (g)

FCFE growth rate (g) implied by PRAT model

Expedia Group Inc., PRAT model

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Average Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in millions)
Payment of dividends to common stockholders — 48 195 186 176
Payment of preferred dividends 67 75 — — —
Net income (loss) attributable to Expedia Group, Inc. 12 (2,612) 565 406 378
Revenue 8,598 5,199 12,067 11,223 10,060
Total assets 21,548 18,690 21,416 18,033 18,516
Total Expedia Group, Inc. stockholders’ equity 2,057 2,532 3,967 4,104 4,522
Financial Ratios
Retention rate1 — — 0.65 0.54 0.53
Profit margin2 -0.64% -51.68% 4.68% 3.62% 3.76%
Asset turnover3 0.40 0.28 0.56 0.62 0.54
Financial leverage4 10.48 7.38 5.40 4.39 4.09
Averages
Retention rate 0.58
Profit margin -8.05%
Asset turnover 0.48
Financial leverage 6.35
 
FCFE growth rate (g)5 -14.20%

Based on: 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31).

2021 Calculations

1 Retention rate = (Net income (loss) attributable to Expedia Group, Inc. – Payment of dividends to common stockholders – Payment of preferred dividends) ÷ (Net income (loss) attributable to Expedia Group, Inc. – Payment of preferred dividends)
= (12 – 0 – 67) ÷ (12 – 67)
= —

2 Profit margin = 100 × (Net income (loss) attributable to Expedia Group, Inc. – Payment of preferred dividends) ÷ Revenue
= 100 × (12 – 67) ÷ 8,598
= -0.64%

3 Asset turnover = Revenue ÷ Total assets
= 8,598 ÷ 21,548
= 0.40

4 Financial leverage = Total assets ÷ Total Expedia Group, Inc. stockholders’ equity
= 21,548 ÷ 2,057
= 10.48

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= 0.58 × -8.05% × 0.48 × 6.35
= -14.20%

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

g = 100 × (Equity market value0 × r – FCFE0) ÷ (Equity market value0 + FCFE0)
= 100 × (23,613 × 18.87% – 3,075) ÷ (23,613 + 3,075)
= 5.17%

where:
Equity market value0 = current market value of Expedia Group Inc. common stock (US$ in millions)
FCFE0 = the last year Expedia Group Inc. free cash flow to equity (US$ in millions)
r = required rate of return on Expedia Group Inc. common stock

FCFE growth rate (g) forecast

Expedia Group Inc., H-model

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Year Value gt
1 g1 -14.20%
2 g2 -9.36%
3 g3 -4.52%
4 g4 0.33%
5 and thereafter g5 5.17%

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)
= -14.20% + (5.17% – -14.20%) × (2 – 1) ÷ (5 – 1)
= -9.36%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= -14.20% + (5.17% – -14.20%) × (3 – 1) ÷ (5 – 1)
= -4.52%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= -14.20% + (5.17% – -14.20%) × (4 – 1) ÷ (5 – 1)
= 0.33%