Is Wyndham Worldwide Fairly Valued?
Wyndham Worldwide Corporation (NYSE: WYN) posted steady revenue growth for fiscal 2017. The growth in the company’s top line was primarily driven by 4% growth in the Vacation Ownership segment, and we expect this trend to continue in the upcoming year. Additionally, the acquisition of La Quinta, expected to close in Q2’18, will add nearly 900 hotels to Wyndham’s portfolio and enhance its presence in the mid-scale segment. This will possibly drive up the RevPar (Revenue per available room) of the Hotel Group Segment.
We have a price estimate of $135 for Wyndham Worldwide, which is around 15% ahead of the current market price. Our price estimate is based on the projection of $5.4 billion revenue in FY’18 and a P/S multiple of 2.6, which is below the industry average.
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Our revenue estimate of $5.4 billion for 2018 is arrived at by projecting revenues for each individual segment. For the Hotel Group segment, expected RevPar is divided by the expected occupancy rate to arrive at the ADR (Average Daily Rate). The ADR is then multiplied by the number of room nights sold and the number of days in a full year to arrive at the Hotel Group Revenue. For other segments, it’s a simple multiplication of price and volume, in addition to other sources of revenue.
Detailed steps to arrive at our price estimate and the revenue calculations are outlined in our interactive dashboard. You can modify our assumptions to arrive at your own price estimate for the company.
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