Host Hotels & Resorts, Inc.HSTNASDAQ

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DCF Valuation

DCF Valuation Summary

Strong Buy

Fair Value: $57.06 per share(market-calibrated)

+190.6%

Upside to Fair Value

Current

$19.64

Pure Model

$59.61

Fair Value

$57.06

Bull Case

$71.77

Bear Case

$48.38

Market Reality Check

Model Terminal Growth

2.50%

Market-Implied Growth

0.50%

Calibrated Growth

1.80%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $59.61.

What's Driving This Ratingfor HST

↓

CapEx normalizing toward maintenance

Historical CapEx is 9.06% of revenue (heavy investment phase). Model fades this to 2.50% by Year 10, freeing up ~$507M in annual FCF. This is the biggest driver of long-term cash flow improvement.

✓

Premium margins already priced in

EBIT margin of 29.16% 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 -0.31% revenue growth, fading to 2.50% by Year 10. Revenue reaches $7.7B (vs $6.1B today).

🎯

Market pricing in lower growth than model

The market implies only 0.50% perpetual growth — 200bps below the model's 2.50%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 89.81% indicates efficient cash generation. FCF reaches $2.9B by Year 10 (37.59% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)1.16

Market Risk Premium4.50%

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

Cost of Equity (Re)9.72%

Cost of Debt

Pre-tax Cost of Debt3.17%

Tax Rate5.13%

After-tax Cost of Debt3.01%

Equity Weight (E/V)68.67%

Debt Weight (D/V)31.33%

WACC Calculation

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

WACC = (68.67% × 9.72%) + (31.33% × 3.01%)

= 7.61%

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	$6.1B	$6.4B	$6.8B	$7.2B	$7.7B
EBIT	$1.8B	$1.9B	$2.0B	$2.1B	$2.3B
Tax	$91M	$96M	$103M	$109M	$118M
NOPAT	$1.7B	$1.8B	$1.9B	$2.0B	$2.2B
+ Depreciation	$734M	$774M	$823M	$865M	$931M
- Capex	$552M	$489M	$420M	$337M	$193M
- Δ NWC	-$2M	$29M	$16M	$17M	$18M
Free Cash Flow	$1.9B	$2.0B	$2.3B	$2.5B	$2.9B
Discount Factor	0.929	0.802	0.693	0.598	0.480
Present Value	$1.7B	$1.6B	$1.6B	$1.5B	$1.4B

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

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$2.9B

Terminal Growth Rate2.50%

WACC7.61%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$58.3B

PV of Terminal Value$28.0B

Exit Multiple Method

Year 10 EBITDA$3.2B

Exit Multiple (EV/EBITDA)22.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$71.3B

PV of Terminal Value$34.2B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$15.6B

PV of Terminal Value$28.0B

Enterprise Value$43.6B

(-) Net Debt$5.4B

Equity Value$38.2B

Shares Outstanding693M

Price per Share$55.12

Exit Multiple Method

PV of Projected FCFs$15.6B

PV of Terminal Value$34.2B

Enterprise Value$49.8B

(-) Net Debt$5.4B

Equity Value$44.4B

Shares Outstanding693M

Price per Share$64.10

Pure Model Fair Value

$59.61

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

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	1.50%	2.00%	2.50%	3.00%	3.50%
5.61%	$76.90	$81.22	$86.93	$94.81	$106.43
6.61%	$64.94	$67.44	$70.55	$74.52	$79.76
7.61%	$56.14	$57.72	$59.61	$61.91	$64.76
8.61%	$49.26	$50.32	$51.55	$53.01	$54.75
9.61%	$43.67	$44.41	$45.26	$46.23	$47.37

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

$48.38

146.4% vs current

• -25% vs analyst consensus
• Terminal growth: 2.0%
• Beta: 1.45

Base Case

$59.61

203.6% vs current

• Analyst consensus
• Terminal growth: 2.5%
• Beta: 1.16

Bull Case

$71.77

265.5% vs current

• +25% vs analyst consensus
• Terminal growth: 3.0%
• Beta: 0.99

Key Assumptions & Drivers• Real Estate Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth-0.31%

Year 3 Revenue Growth4.96%

Year 5 Revenue Growth2.50%

Year 7 Revenue Growth2.50%

Year 10 Revenue Growth2.50%

Terminal Growth Rate2.50%

Margin & Efficiency

Current EBIT Margin29.16%

Terminal EBIT Margin30.00%

Tax Rate5.13%

Historical Capex / Rev9.06%

Terminal Capex / Rev2.50%

NWC / Revenue9.65%

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: 22x EV/EBITDA (Real Estate 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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