Expedia, Inc. (EXPE)

Comparison analysis | Discount cash flow analysis

5% margin of safety What's this?

Dollar

Point

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Sell Overvalued by 25.3%

Dbbuynow

How does this work?

This is an interactive analyst report for Expedia, Inc., based on a discounted cash flow valuation approach.

You can modify the assumptions and the valuation will be updated automatically. You can also save and share your valuation.

Values in $ millions

2008	2009	2010	2011	2012	2013	2014	2015

What will the revenues be in the future?

Growth beyond year three is driven by the terminal growth rate.

EBITDA Margin (%)

2008	2009	2010	2011

What will the profit margins be in the future?

EBITDA is Earnings Before Interest, Tax, Depreciation and Amortisation.

Values in $ millions

	2008	2009	2010	2011	Terminal

What will capital expenditure will be required in the future?

Capital investment beyond year three is driven by the terminal figure.

Values in $ millions

2008	2009	2010	2011

What will the depreciation be in the future?

Capital Expenditure is the cash that the company actually spends and Depreciation is the accounting treatment

	Figures (millions)
Enterprise value:	5,109
Equity value:	4,323
Net debt:	786
Value of equity:	4,323
Shares outstanding:	288,000,000
Valuation updated:	04 Jul 2009
Valuation views:	0

Valuation Assumptions What are these?





Discount Rate (%)	Terminal Growth (%)	Tax (%)

Dollar

Point

Implied share price

Within margin of safety Undervalued by 0.0%

Dbbuynow

Valuation metric: What's this?

EXPE	HRB	CTAS	TT.	WTW

What is EV / Revenue?

Measures the value of each dollar of revenue (EV terms).

Higher means that the revenue is more highly valued (because of growth, profitability, etc).

Lower compared to peers may represent an opportunity - cheap.

EXPE	HRB	CTAS	TT.	WTW

What is Market cap / Revenue?

Measures the value of each dollar of revenue (Market Cap terms).

Higher means that the revenue is more highly valued (because of growth, profitability, etc).

Lower compared to peers may represent an opportunity - cheap.

EXPE	HRB	CTAS	TT.	WTW

What is EV / EBITDA?

Measures the value of each dollar of EBITDA (EV terms).

Higher means that the EBITDA is more highly valued (because of growth, margin, etc).

Lower compared to peers may represent an opportunity - cheap.

EXPE	HRB	CTAS	TT.	WTW

What is EV / EBIT?

Measures the value of each dollar of EBIT (EV terms).

Higher means that the EBIT is more highly valued (because of growth, margin, etc).

Lower compared to peers may represent an opportunity - cheap.

EXPE	HRB	CTAS	TT.	WTW

What is Market cap / EBITDA?

Measures the value of each dollar of EBITDA (Mkt Cap terms).

Higher means that the EBITDA is more highly valued (because of growth, margin, etc).

Lower compared to peers may represent an opportunity - cheap.

EXPE	HRB	CTAS	TT.	WTW

What is Market cap / EBIT?

Measures the value of each dollar of EBIT (Mkt Cap terms).

Higher means that the EBIT is more highly valued (because of growth, margin, etc).

Lower compared to peers may represent an opportunity - cheap.

EXPE	HRB	CTAS	TT.	WTW

What is Price / Earnings?

Measures the ratio of the current price per share and the earnings per share.

Higher means that the revenue is more highly valued (because of growth, profitability, etc).

Lower compared to peers may represent an opportunity - cheap.

EXPE	HRB	CTAS	TT.	WTW

What is Return on Assets?

Measures the profitability of the company relative to the company's total assets.

Higher is better - but the key is comparaing against peer companies in the same industry.

EXPE	HRB	CTAS	TT.	WTW

What is Return on Equity?

Measures the profitability of the company relative to the company's shareholders equity.

Higher is better - but the key is comparaing against peer companies in the same industry.

	Expedia, Inc. EXPE	H&R Block, Inc. HRB	Cintas Corporation CTAS	TUI Travel PLC TT.	Weight Watchers International, Inc. WTW
All amounts in millions Values from last financial year
Ratios
EV / revenue	1.74	1.26	1.05	0.13	2.31
Market cap / revenue	1.47	1.38	0.86	0.18	1.27
EV / EBITDA	7.16	5.33	5.39	2.12	7.89
EV / EBIT	9.01	6.1	7.18	3.49	8.34
Market cap / EBITDA	6.06	5.86	4.41	3.04	4.33
Market cap / EBIT	7.62	6.71	5.87	5.0	4.58
Price / earnings ratio	-1.7	11.3	10.92	-8.67	10.13
EV / total assets	0.87	0.96	1.09	0.19	3.2
Market cap / total assets	0.73	1.05	0.89	0.28	1.76
Market capitalisation:	4,323	5,643	3,391	2,565	1,946
Net Debt (LT Borrowings - Cash)	786	-513	752	-777	1,600
Enterprise Value (EV)	5,109	5,129	4,144	1,793	3,546
Revenue (Last Financial year - LFY)	2,937	4,083	3,937	13,931	1,535
EBITDA (LFY)	713	962	769	844	449
Percent	24.3 %	23.6 %	19.5 %	6.1 %	29.3 %
EBIT	567	841	577	513	425
Percent	19.3 %	20.6 %	14.7 %	3.7 %	27.7 %
Balance sheet
Total assets	5,894	5,359	3,808	9,327	1,106
Total liabilities	3,565	3,953	1,554	6,736	1,994
Shareholders equity	2,328	1,405	2,254	2,591	-887.516
Implied share price	$15.00	$22.80	$39.92	£22.38	$13.92

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Sensitivity matrix

		-1%	Discount Rate % 0%	1%
	-1%	$11.32	$11.17	$11.02
Terminal Growth%	0	$11.36	$11.20	$11.05
	+1%	$11.40	$11.24	$11.09

How does a change in discount rate or terminal growth affect valuation?

This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate

Valuations and comments

Valuecruncher created a new valuation of $11.20 (overvalued by 25.33%) - 1 hour ago
SethWellbourne created a new valuation of $10.50 (undervalued by 17.85%) - 3 months ago
GordonGekko created a new valuation of $9.50 (undervalued by 28.73%) - 3 months ago
TheCrunchBlog created a new valuation of $23.21 (undervalued by 20.45%) - 10 months ago

Comments

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The boring details

All amounts in millions	Figures
Enterprise Value:	5,109
Net Debt (Long-term borrowings less cash):	786
Equity Value:	4,323
Number of Shares Outstanding:	288,000,000
Calculated value per share:	$11.20

Enterprise Value is the present value of the post-tax cash flows for a business into the future.

Calcuation of EV

Where:

C1, C2, C3 - the cash flow in period 1, 2, 3, ...
r - the discount rate

To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.

Perpetuity

Where:

Cn - the cash flow in the final forecast period.
LTG - the long-term growth rate
r - the discount rate
g - the terminal growth rate

The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.

CAPM model

Where:

rt - the risk free rate
t - the tax rate
B - the beta of the company
MRP - the Market Risk Premium

Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.