Hilton Worldwide Holdings Inc.HLTNYSE

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DCF Valuation

DCF Valuation Summary

Sell

Fair Value: $231.24 per share(market-calibrated)

-24.4%

Upside to Fair Value

Current

$305.94

Pure Model

$221.21

Fair Value

$231.24

Bull Case

$304.25

Bear Case

$152.93

Market Reality Check

Model Terminal Growth

3.00%

Market-Implied Growth

5.30%

Calibrated Growth

3.58%

Fair value uses 75% model / 25% market-implied terminal growth. Pure model: $221.21.

What's Driving This Ratingfor HLT

✓

CapEx already efficient

CapEx at 1.21% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

✓

Premium margins already priced in

EBIT margin of 26.17% 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 8.57% revenue growth, fading to 3.00% by Year 10. Revenue reaches $22.9B (vs $12.0B today).

↔

Perpetuity and exit methods disagree

Perpetuity growth gives $178.59/share (19.6x terminal FCF) while exit multiple gives $263.83/share (30.5x 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 higher long-term growth

To justify $305.94, the market implies 5.30% perpetual growth — 230bps above the model's 3.00%. This suggests the market sees additional growth catalysts (AI, new products, market expansion) not captured in analyst estimates.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 65.67% indicates efficient cash generation. FCF reaches $4.1B by Year 10 (17.95% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.12

Market Risk Premium4.50%

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

Cost of Equity (Re)9.55%

Cost of Debt

Pre-tax Cost of Debt3.15%

Tax Rate29.68%

After-tax Cost of Debt2.21%

Equity Weight (E/V)82.17%

Debt Weight (D/V)17.83%

WACC Calculation

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

WACC = (82.17% × 9.55%) + (17.83% × 2.21%)

= 8.24%

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	$13.1B	$15.1B	$17.9B	$20.3B	$22.9B
EBIT	$3.4B	$4.0B	$4.7B	$5.3B	$6.0B
Tax	$1.0B	$1.2B	$1.4B	$1.6B	$1.8B
NOPAT	$2.4B	$2.8B	$3.3B	$3.7B	$4.2B
+ Depreciation	$152M	$176M	$208M	$236M	$266M
- Capex	$158M	$183M	$216M	$246M	$276M
- Δ NWC	$145M	$140M	$189M	$163M	$94M
Free Cash Flow	$2.3B	$2.6B	$3.1B	$3.6B	$4.1B
Discount Factor	0.924	0.788	0.673	0.574	0.453
Present Value	$2.1B	$2.1B	$2.1B	$2.0B	$1.9B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$4.1B

Terminal Growth Rate3.00%

WACC8.24%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$80.6B

PV of Terminal Value$36.5B

Exit Multiple Method

Year 10 EBITDA$6.3B

Exit Multiple (EV/EBITDA)20.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$125.1B

PV of Terminal Value$56.6B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$20.3B

PV of Terminal Value$36.5B

Enterprise Value$56.8B

(-) Net Debt$14.7B

Equity Value$42.1B

Shares Outstanding236M

Price per Share$178.59

Exit Multiple Method

PV of Projected FCFs$20.3B

PV of Terminal Value$56.6B

Enterprise Value$77.0B

(-) Net Debt$14.7B

Equity Value$62.3B

Shares Outstanding236M

Price per Share$263.83

Pure Model Fair Value

$221.21

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%
6.24%	$291.81	$307.68	$328.43	$356.76	$397.70
7.24%	$244.05	$253.37	$264.88	$279.46	$298.54
8.24%	$208.19	$214.13	$221.21	$229.78	$240.37
9.24%	$179.73	$183.75	$188.41	$193.88	$200.40
10.24%	$156.33	$159.16	$162.38	$166.08	$170.38

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

$152.93

-50.0% vs current

• -25% vs analyst consensus
• Terminal growth: 2.5%
• Beta: 1.40

Base Case

$221.21

-27.7% vs current

• Analyst consensus
• Terminal growth: 3.0%
• Beta: 1.12

Bull Case

$304.25

-0.6% vs current

• +25% vs analyst consensus
• Terminal growth: 3.5%
• Beta: 0.95

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

Growth Assumptions (Select Years)

Year 1 Revenue Growth8.57%

Year 3 Revenue Growth7.06%

Year 5 Revenue Growth8.12%

Year 7 Revenue Growth6.07%

Year 10 Revenue Growth3.00%

Terminal Growth Rate3.00%

Margin & Efficiency

Current EBIT Margin26.17%

Tax Rate29.68%

Historical Capex / Rev1.21%

NWC / Revenue14.04%

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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