Expedia Group, Inc.EXPENASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $564.66 per share(market-calibrated)

+162.0%

Upside to Fair Value

Current

$215.48

Pure Model

$582.44

Fair Value

$564.66

Bull Case

$720.69

Bear Case

$458.16

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

0.50%

Calibrated Growth

2.13%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $582.44.

What's Driving This Ratingfor EXPE

↓

CapEx normalizing toward maintenance

Historical CapEx is 5.03% of revenue (heavy investment phase). Model fades this to 4.00% by Year 10, freeing up ~$244M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 24.80% is already well above sector average. The model holds this level — there's limited room for margin expansion to drive upside. Valuation depends primarily on revenue growth.

→

Moderate revenue growth

Analyst consensus projects 8.02% revenue growth, fading to 3.00% by Year 10. Revenue reaches $23.6B (vs $14.7B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $483.97/share (16.4x terminal FCF) while exit multiple gives $680.91/share (28.2x terminal FCF). The 20x EV/EBITDA exit reflects current market multiples, while the perpetuity method with 3.00% growth is more conservative. The base case averages both methods.

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 250bps below the model's 3.00%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 71.03% indicates efficient cash generation. FCF reaches $5.1B by Year 10 (21.61% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.38

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)10.72%

Cost of Debt

Pre-tax Cost of Debt4.25%

Tax Rate18.23%

After-tax Cost of Debt3.48%

Equity Weight (E/V)80.20%

Debt Weight (D/V)19.80%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (80.20% × 10.72%) + (19.80% × 3.48%)

= 9.29%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$15.9B	$18.4B	$20.3B	$21.6B	$23.6B
EBIT	$3.9B	$4.6B	$5.0B	$5.4B	$5.9B
Tax	$719M	$833M	$918M	$975M	$1.1B
NOPAT	$3.2B	$3.7B	$4.1B	$4.4B	$4.8B
+ Depreciation	$894M	$1.0B	$1.1B	$1.2B	$1.3B
- Capex	$801M	$885M	$929M	$937M	$944M
- Δ NWC	$118M	$139M	$61M	$64M	$69M
Free Cash Flow	$3.2B	$3.7B	$4.3B	$4.6B	$5.1B
Discount Factor	0.915	0.766	0.641	0.537	0.412
Present Value	$2.9B	$2.9B	$2.7B	$2.5B	$2.1B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$5.1B

Terminal Growth Rate3.00%

WACC9.29%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$83.5B

PV of Terminal Value$34.4B

Exit Multiple Method

Year 10 EBITDA$7.2B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$143.5B

PV of Terminal Value$59.1B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$26.0B

PV of Terminal Value$34.4B

Enterprise Value$60.4B

(-) Net Debt-$307M

Equity Value$60.7B

Shares Outstanding125M

Price per Share$483.97

Exit Multiple Method

PV of Projected FCFs$26.0B

PV of Terminal Value$59.1B

Enterprise Value$85.1B

(-) Net Debt-$307M

Equity Value$85.4B

Shares Outstanding125M

Price per Share$680.91

Pure Model Fair Value

$582.44

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.00%	2.50%	3.00%	3.50%	4.00%
7.29%	$708.51	$729.86	$756.18	$789.47	$832.88
8.29%	$627.07	$640.72	$656.97	$676.60	$700.82
9.29%	$562.47	$571.72	$582.44	$595.02	$609.97
10.29%	$509.35	$515.88	$523.31	$531.83	$541.71
11.29%	$464.56	$469.32	$474.65	$480.67	$487.52

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$458.16

112.6% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.73

Base Case

$582.44

170.3% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.38

Bull Case

$720.69

234.5% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 1.17

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Consumer Cyclical Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth8.02%

Year 3 Revenue Growth8.18%

Year 5 Revenue Growth3.12%

Year 7 Revenue Growth3.07%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin24.80%

Tax Rate18.23%

Historical Capex / Rev5.03%

Terminal Capex / Rev4.00%

NWC / Revenue10.00%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 20x EV/EBITDA (Consumer Cyclical sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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