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 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)

Expedia Group 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 14.48%
01 FCFF0 3,345
1 FCFF1 3,350 = 3,345 × (1 + 0.14%) 2,926
2 FCFF2 3,386 = 3,350 × (1 + 1.07%) 2,584
3 FCFF3 3,454 = 3,386 × (1 + 2.01%) 2,302
4 FCFF4 3,556 = 3,454 × (1 + 2.95%) 2,070
5 FCFF5 3,694 = 3,556 × (1 + 3.89%) 1,879
5 Terminal value (TV5) 36,233 = 3,694 × (1 + 3.89%) ÷ (14.48% – 3.89%) 18,430
Intrinsic value of Expedia Group Inc. capital 30,192
Less: Series A Preferred Stock (fair value) 0
Less: Long-term debt, including current maturities (fair value) 9,200
Intrinsic value of Expedia Group Inc. common stock 20,992
 
Intrinsic value of Expedia Group Inc. common stock (per share) $133.62
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.

Weighted Average Cost of Capital (WACC)

Expedia Group Inc., cost of capital

Microsoft Excel
Value1 Weight Required rate of return2 Calculation
Equity (fair value) 23,613 0.72 18.97%
Series A Preferred Stock (fair value) 0 0.00 0.00%
Long-term debt, including current maturities (fair value) 9,200 0.28 2.93% = 3.57% × (1 – 17.89%)

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

1 US$ in millions

   Equity (fair value) = No. shares of common stock outstanding × Current share price
= 157,097,831 × $150.31
= $23,613,374,977.61

   Long-term debt, including current maturities (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
= (21.00% + 13.42% + 26.19% + 17.94% + 10.89%) ÷ 5
= 17.89%

WACC = 14.48%

FCFF Growth Rate (g)

FCFF growth rate (g) implied by PRAT model

Expedia Group Inc., PRAT model

Microsoft Excel
Average Dec 31, 2021 Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017
Selected Financial Data (US$ in millions)
Interest expense 351 360 173 190 182
Net income (loss) attributable to Expedia Group, Inc. 12 (2,612) 565 406 378
 
Effective income tax rate (EITR)1 21.00% 13.42% 26.19% 17.94% 10.89%
 
Interest expense, after tax2 277 312 128 156 162
Add: Payment of preferred dividends 67 75 — — —
Add: Payment of dividends to common stockholders — 48 195 186 176
Interest expense (after tax) and dividends 344 435 323 342 338
 
EBIT(1 – EITR)3 289 (2,300) 693 562 540
 
Current maturities of long-term debt 735 — 749 — 500
Long-term debt, excluding current maturities 7,715 8,216 4,189 3,717 3,749
Total Expedia Group, Inc. stockholders’ equity 2,057 2,532 3,967 4,104 4,522
Total capital 10,507 10,748 8,905 7,821 8,771
Financial Ratios
Retention rate (RR)4 -0.19 — 0.53 0.39 0.37
Return on invested capital (ROIC)5 2.75% -21.40% 7.78% 7.18% 6.16%
Averages
RR 0.28
ROIC 0.49%
 
FCFF growth rate (g)6 0.14%

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).

1 See details »

2021 Calculations

2 Interest expense, after tax = Interest expense × (1 – EITR)
= 351 × (1 – 21.00%)
= 277

3 EBIT(1 – EITR) = Net income (loss) attributable to Expedia Group, Inc. + Interest expense, after tax
= 12 + 277
= 289

4 RR = [EBIT(1 – EITR) – Interest expense (after tax) and dividends] ÷ EBIT(1 – EITR)
= [289 – 344] ÷ 289
= -0.19

5 ROIC = 100 × EBIT(1 – EITR) ÷ Total capital
= 100 × 289 ÷ 10,507
= 2.75%

6 g = RR × ROIC
= 0.28 × 0.49%
= 0.14%

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

g = 100 × (Total capital, fair value0 × WACC – FCFF0) ÷ (Total capital, fair value0 + FCFF0)
= 100 × (32,813 × 14.48% – 3,345) ÷ (32,813 + 3,345)
= 3.89%

where:

Total capital, fair value0 = current fair value of Expedia Group Inc. debt and equity (US$ in millions)
FCFF0 = the last year Expedia Group Inc. free cash flow to the firm (US$ in millions)
WACC = weighted average cost of Expedia Group Inc. capital

FCFF growth rate (g) forecast

Expedia Group Inc., H-model

Microsoft Excel
Year Value gt
1 g1 0.14%
2 g2 1.07%
3 g3 2.01%
4 g4 2.95%
5 and thereafter g5 3.89%

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)
= 0.14% + (3.89% – 0.14%) × (2 – 1) ÷ (5 – 1)
= 1.07%

g3 = g1 + (g5 – g1) × (3 – 1) ÷ (5 – 1)
= 0.14% + (3.89% – 0.14%) × (3 – 1) ÷ (5 – 1)
= 2.01%

g4 = g1 + (g5 – g1) × (4 – 1) ÷ (5 – 1)
= 0.14% + (3.89% – 0.14%) × (4 – 1) ÷ (5 – 1)
= 2.95%