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Hilton Grand Vacations Inc. (HGV) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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Hilton Grand Vacations Inc. (HGV)

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Intrinsic Value (DCF)

Current$48.19
→
Intrinsic$0.00
-100%
0
$0.00$0.00$25.33
HGV's FCF is temporarily suppressed due to reinvestment (actual margin: 2.3%). Valuation uses normalized cash flow (8% target margin) to reflect long-term earnings power.
Current price reflects expectations beyond normalized FCF — likely anticipating margin expansion, capital returns, or segment dominance.
Current price reflects assumptions at the upper end of our valuation range (bull case: $25).
Discount ↓Growth →18%20%22%24%
8%$4$10$16$22
10%$0$0$0$0
12%$0$0$0$0
14%$0$0$0$0

Bull Case

  • Bull case ($25) with 26% growth, 9% discount rate

Bear Case

  • Trading 100% above base case — execution must exceed assumptions to justify
  • Price exceeds bull case ($25) — requires exceptional execution
  • Using 22% growth — aggressive, watch for mean reversion

5-Year Free Cash Flow Projection

Year 1$223.38M
Year 2$272.67M
Year 3$332.84M
Year 4$406.28M
Year 5$495.93M
Terminal$7.30B

📐 Model Inputs

Growth Rate22.1%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Free Cash Flow$183.00MNormalized (8% margin)
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
⚡ Reinvestor Mode: FCF margin is 2.3% (below 5% threshold). Using Revenue × 8% to reflect long-term earnings power.
ℹ️

DCF estimates based on historical growth rates extrapolated forward. Uses normalized FCF (Revenue × 8%) due to reinvestment-suppressed margins. See FAQ below for full methodology.

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Frequently Asked Questions

Is HGV stock undervalued or overvalued?
🟡 FAIRLY VALUED

HGV trades at $48.19, within 10% of our $48.64 intrinsic value estimate. At 10.0% WACC and 22.1% FCF growth, the market is pricing in assumptions roughly aligned with the 5-year historical CAGR. The valuation range spans $9.57 (bear) to $106.17 (bull).

What is HGV's intrinsic value?

Using a 5-year DCF model: Base FCF of $183M, projected at 22.1% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $6.69B net debt and dividing by 0.10B shares: Bear $9.57 | Base $48.64 | Bull $106.17. Current price $48.19 implies +5% to base case.

How is HGV's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 22.1% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap). Note: FCF is normalized to 8% of revenue due to reinvestment-suppressed margins.

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($11.71B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 64.0x.

⚡ Reinvestor Mode: HGV's FCF margin (2.3%) is below 5% due to heavy reinvestment. We use normalized FCF (Revenue × 8% target margin) to reflect long-term earnings power rather than temporarily suppressed cash flows.