Marriott International is an operator, franchisor, and licensor of hotels and timeshare

properties under numerous brand names at different price and service points. Co. also

operates, markets, and develops residential properties and provides services to

home/condominium owner associations.Co. has three segments: North American

Full-Service, North American Limited-Service and International. At year-end 2016, Co.

operated 1,821 properties (521,552 rooms), 48 properties (10,933 rooms) under long-term

lease agreements, and 22 properties (9,906 rooms) that it owns. In addition, Co. operated 44

home and condominium communities (5,179 units) for which it manages the related owners'

associations.

Ratios

Current ratio - Marriott’s ability to pay in short term and long term obligations is quite

dangerous at 0.65 in 2016. The company keeps it stable through years which can be seen that

in 2013 with 0.71, however, the ratio decreased in the two following years and kept it stable

at 0.65 in 2015. It could interpret that ​the company is not in good financial health, it does not

necessarily mean that it will go bankrupt. It just indicates that a company’s liabilities are
greater than its assets and suggests that the company in question would be unable to pay off

its obligations if they came due at that point.

Quick Ratio - The quick ratio is a liquidity ratio that measures a company's ability, using its

quick assets, to pay off its current debt as they come due. In 4 years from 2013 to 2016,

Marriott also had the stable quick ratio with range around 0.4 which show that the company

had a little bit difficulty facing with it quick assets paid off for it current debt.

Cash ratio - ​cash ratio is most commonly used as a measure of company's liquidity. Since the

cash ratio is small which was at 0.03 in 2014 and 2015 and increased 0.17 in 2017, we can

say that the company has more current liabilities than cash. Marriott would stay in difficulty

when the short term debt needs to pay off by cash. Marriott focuses on the stategy to have

low cash reserve. In hotel industry, it is good to operate with higher current liabilities and

lower cash reserves. Based on the ratio, it can be seen that Marriot is on it right strategy of

high liabilities.

Total asset turnover ​- Marriott operated really good from 2013 to 2015 with high total asset

turnover range from 1.93 to 2.24. this high ratios imply that the company is generating more

revenue per dollar of assets. Even though, there was a downfall in 2016 at 1.13, the company

still operated good and the ratio in the future is estimated to increase in the next few years.

Total debt ratio - The debt ratio compares a company's total debt to its total assets. From

2013 to 2015, Marriott’s debt ratio stayed around 1.3 then raised to 1.59 in 2015, which

showed that the risk the company had to face was high. In 2016, the debt ratio decreased

significantly to 0.78 which is a good sign to show that the company is using less leverage and

has strong equity position.

Debt - Equity ratio ​- ​The debt-equity ratio is another leverage ratio that compares a

company's total liabilities to its total shareholders' equity. The debt - equity ratio didn’t value
until 2016 with 1.59 while the other years the equity was lower than 0. It is hard to judge

whether it is good or bad because the result will vary by industry.

Equity multiplier - It can be seen from the table that the equity ratio was at negative in 3 years

from 2013 to 2015. However, in 2016, this ratio increased rapidly to 4.51 which shown that a

large proportion of asset financing is attributed to debt.

Return on Equity (ROE) - for the last 3 years from 2013 to 2015, the average equity is very

small which was lower than 1, ROE was not be calculated. However, Marriott made a

breakthrough with 88.4% in return on equity. This shows that the amount of income returned

to shareholders equity is 88.4%. The company is working perfectly to generate back profit for

shareholders.

Return on asset (ROA)​. It can be seen that Marriot had a really good strategy which was

shown that ROA ratio increased from 9.45 to 13.27 in 2015. However, it fell significantly to

5.15 in 2016. The downfall implies the company should have a better strategy to use it assets

to generate earnings.

Profit margin - Through 4 years with different situation of financial market and hotel

industry, Marriott still keeps its profit margin stable around 0.049.

Inventory turnover - Marriott does not have inventory turnover. Inventory turnover measures

how fast a company is selling inventory and is generally compared against industry averages.

so Marriott handle it inventory and didn’t sell. It is understand in this industry this is a good

sign for the company.

There are two basic valuation methodoligies applicated to Marriott International: Discounted

Cash Flow (DCF) and Valuation with comparable

Discounted cash flow valuation (DCF Valuation)

Discounted cash flow valuation is a valuation method used to estimate the attractiveness of an

investment opportunity.

Operating cash flow is calculated by EBIT (earnings before taxes) plus depreciation and

mimus taxes which is calculated as 948,000 thousands in USD. This shows that Marriott

generates 948,000 thousand dollars cash through its operation.

Change in net working capital (NWC) ​- Marriot’s net working capital is usually short in

duration due to its hotel business. Change in working capital is calculated by the difference

between the change in working capital in 2016 and the NWC in 2015 which is 73,000

thousands USD.

Capital spending​ - Marriott focuses mainly on hotel segments, therefore, physical assets such

as buildings, maintainances, equipments, etc are improved and maintained to provide the best

services for customers. The company spends 1,562,000 thousands on capital.

Free cash flow (FCF) ​is a measure of a company’s financial performance calculated as

operating cash flow minus cash spending. The amount of cash Marriott generates after

accounting for all capital expenditures, such as buildings or property, plant and equipment is

2,437,000 thousands USD. It is showing that Marriott has huge chance to enhance its

shareholder value.
Growth rate ​- growth rate showing the development of the company during the year. In 2017,

Marriott achieved an average growth rate at 0.562 (56.2%) which is good while this year, the

economics was slow.

The final component of the valuation was the calculation of a weighted average cost of

capital (WACC) for Marriott

Debt - Estimated were needed for cost of debt and tax rate. Cost of debt at this time is 3.91%.

Tax rate is calculate at 0.341.

Equity - To calculate the cost of equity, assumptions need to be made about the risk-free rate

of interest (kRF ), the ​market risk premium ​(MRPm ), and Marriott’s ​beta ​(β). e cost of equity

was then calculated as the risk-free rate plus a beta-adjusted market risk premium.

Cost of equity = ke = kRF + β x MRPm

Risk free rate is 2.37% and market risk premium is 13.20%. Marriott’s beta is estimated as

1.39. A company’s beta was measured over time, statistically, as the covariance of the

company’s return with that of the market, divided by the variance of the market return. By

definition, the beta of the market was 1.0. A firm with returns that were relatively less

volatile than the market might have a beta less than 1, typically between 0.6 and 1.0. A firm

demonstrating more volatile returns than the market may have a beta as high as 1.8 or more.
As illustrated in ​Exhibit ..., current estimates of the market cost of debt and equity were used

to calculate a weighed average cost of capital (WACC). Ferrari’s capital structure was largely

equity, with interest-bearing debt outstanding of 18,783,000 thousands, representing only

7.78% of its capital structure. The WACC was calculated as 5.87%. Based on this, free cash

flow in 2018 can be estimated as -4,840,313.82

Total enterprise value is 15,028,436.03 thousands USD.

Relative Valuation Model

A second valuation methodology widely used by investors and analysts was

comparable multiples​. A ​comparable ​was any business or firm that would be considered a

close competitor. A ​comparable valuation multiple ​is any form of comparison across

companies using a ratio or multiple of other nancial values. When valuing companies, this

typically involves combining a market-based value measure, like share price, with a financial

statement value, like earnings or cash flow.

We use price to earning ratio (PE) to estimate the multiplier of 55.910. Compared to the

multiplier calculated, Marriot International has the current earning near to the multiplier of

comparable firms.
Based on the multiplier, value of Marriott today is 176.4 which is quite high for the industry.

After obtained two ways of valuation: DCF valuation and value relative to comparable​, DCF

valuation is suitable for the valuation since enterprise value is positive and the WACC is

greater than the growth rate​. DCF refers to the internal operation of the firm with Different

variations of the model account for different growth rates and Relies on free cash flows rather

than accounting figures. Meanwhile, value relative to comparable model refer to estimate

firm value through the group of company in the same industry.