Marriott Vacations Worldwide Stock To $47?

Marriott Vacations Worldwide (VAC) stock has jumped 17% during the past day, and is currently trading at $67.66. Our multi-factor assessment suggests that it may be time to sell VAC stock. We have, overall, a pessimistic view of the stock, and a price of $47 may not be out of reach. We believe there are several things to fear in VAC stock given its overall Very Weak operating performance and financial condition. This isn’t appropriately reflected in the stock’s Moderate valuation which is why we think it is Very Unattractive.

Below is our assessment:

Individual stocks can be volatile and shake you out, but strategic allocation and diversification helps you stay invested. Our Boston-based, wealth management partner’s asset allocation approach is designed exactly for that.

Let’s get into details of each of the assessed factors but before that, for quick background: With $2.4 Bil in market cap, Marriott Vacations Worldwide provides vacation ownership, exchange networks, membership programs, and management services across approximately 120 properties in the U.S. and 13 other countries and territories.

[1] Valuation Looks Moderate

This table highlights how VAC is valued vs broader market. For more details see: VAC Valuation Ratios

[2] Growth Is Inconsistent

• Marriott Vacations Worldwide has seen its top line grow at an average rate of 3.3% over the last 3 years
• Its revenues have grown 4.2% from $4.8 Bil to $5.0 Bil in the last 12 months
• Also, its quarterly revenues declined -3.2% to $1.3 Bil in the most recent quarter from $1.3 Bil a year ago.

This table highlights how VAC is growing vs broader market. For more details see: VAC Revenue Comparison

[3] Profitability Appears Very Weak

• VAC last 12 month operating income was $505 Mil representing operating margin of 10.0%
• With cash flow margin of 2.4%, it generated nearly $122 Mil in operating cash flow over this period
• For the same period, VAC generated nearly $173 Mil in net income, suggesting net margin of about 3.4%

This table highlights how VAC profitability vs broader market. For more details see: VAC Operating Income Comparison

[4] Financial Stability Looks Very Weak

• VAC Debt was $5.6 Bil at the end of the most recent quarter, while its current Market Cap is $2.4 Bil. This implies Debt-to-Equity Ratio of 238.8%
• VAC Cash (including cash equivalents) makes up $474 Mil of $10 Bil in total Assets. This yields a Cash-to-Assets Ratio of 4.7%

[5] Downturn Resilience Is Very Weak

VAC has fared much worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.

2022 Inflation Shock

• VAC stock fell 61.2% from a high of $188.09 on 12 March 2021 to $72.90 on 30 November 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
• The stock is yet to recover to its pre-Crisis high
• The highest the stock has reached since then is $107.73 on 31 March 2024 , and currently trades at $67.66

 
2020 Covid Pandemic

• VAC stock fell 71.5% from a high of $129.25 on 17 January 2020 to $36.81 on 18 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
• However, the stock fully recovered to its pre-Crisis peak by 10 November 2020

But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read VAC Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.

The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.