Expedia Group, Inc. (EXPE)

Total return at 5 years: 25.6%/year = 25.0% appreciation + 0.6% dividend. The target price ($819) is ex-dividend; the $11 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $651 · Multiples $667) exceeds the market price ($268).

Today — with margin of safety: at $268 trades ~59.8% below its value discounted to today (~$667) — the wide discount we require (≥38%, equivalent to a ~15% annual return); the risk is covered by the margin, not the rate.

At 5 years — Muy infravalorado: the target price ($819) plus dividends yield above the required average return (10%) — the business compounds.

The bridge: the return at 5 years comfortably exceeds the risk-free rate (4.5%) — and the discount reaches the required margin of safety.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($268) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (-12.6%/year) than we project (7.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$1.3 bn of owner earnings in year 5 (vs ~$3.6 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). Cash accumulates the retained surplus —what is not returned as dividend or buyback—, so that EV falls and multiples compress going forward. The valuation is done on EV/EBIT. In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

The model values the consolidated business (B2C + B2B + trivago) on EV/EBIT, the standard metric for a capital-light travel marketplace: it charges the effective tax burden and does not give away capex, although the latter is modest (US$0.757bn TTM on US$15.7bn of revenue, ~4.8%) and in fact runs below depreciation and amortization (US$0.901bn), consistent with a business already operating on a mature technology platform with little growth capex beyond maintenance. Stock-based compensation is 2.6% of revenue and 9.2% of TTM free cash flow, both below the method's materiality thresholds (8-10% of revenue or 15-20% of flow), so EV/EBIT does not require the ex-SBC adjustment. TTM EBIT margin (15.97%) jumped sharply from 12.70% for full year 2025, driven by an exceptional second quarter of 2026 (operating income +65% year over year); the company's own guidance for full-year 2026 (Adjusted EBITDA margin expansion of +1.5 to +1.75 percentage points) corroborates that this TTM level is not an isolated peak but the current trajectory, so it is taken as the normalized year-0 base. The share path (net buybacks ~5%/year, the same across all three scenarios) comes from the sustained, revealed reduction in the diluted count, which fell from 161.8 million in 2022 to 122.6 million in the most recent quarter. Negative working capital (the merchant model collects from the traveler before paying the supplier, via the deferred merchant bookings liability) leaves consolidated invested capital in negative territory; return on capital is measured on contributed capital, not on this aggregate.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $819 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $268, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $819 in 5 years plus $11 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $667. Against the current market price ($268), the margin of safety is 59.8% (trades below the maximum → there is margin) and the total return at that price would be 25.6% annually.

• Entry multiple. Today's entry multiple on TTM EBIT already reflects part of the recent acceleration, but does not yet fully price in the margin expansion guided by the company for 2026.
• Dividend yield. The current dividend of US$1.92 per share represents a yield of 0.59% at the current price, with recent growth of 20% between November 2025 and March 2026.
• Buybacks and per-share value. The sustained reduction in the diluted count (5%/year projected) compounds per-share value in addition to business growth.
• No market punishment. The absence of market punishment reduces (but does not eliminate) the margin of safety against a sentiment-reversal scenario.
• Implied return at market price. The base case implies an annual return of +26%, comfortably clearing the great-investment bar (15%).

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (125%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Cash generation. TTM operating cash flow of US$5.216bn, though partly inflated by growth in the deferred merchant bookings float; real free cash flow (net of capex) is US$4.459bn.
• Return on contributed capital. TTM NOPAT on contributed capital (equity + debt, without netting excess cash) of approximately 30.8%, well above the 10% bar.
• Reinvestment runway. TTM capex (US$0.757bn) runs below depreciation (US$0.901bn), reflecting a technologically mature business with little identifiable incremental growth capex.
• Stock-based compensation. TTM SBC of US$0.412bn equals 2.6% of revenue and 9.2% of free cash flow, both below the method's materiality thresholds.
• Cash conversion. Real TTM free cash flow (US$4.459bn) comfortably exceeds net income (US$2.036bn), though part of that gap reflects float growth and is not entirely recurring at the same pace.
• Normalized effective tax rate. The effective rate fell from 32-36% levels in 2022-2023 to 18.2% over the trailing twelve months, partly reflecting changes in U.S. tax law recognized by the company itself.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Expedia Group's revenue breaks down as gross bookings × take rate. Gross bookings grow through booking-night volume and average daily rate (ADR), while the take rate depends on the mix between the merchant model (more profitable, 70% of revenue) and the agency model. The B2B segment is the engine of the recent acceleration: its bookings grow 21% year over year against B2C's 8%, and its revenue 23% against B2C's 8% — the mix shift toward B2B lifts the consolidated take rate and explains much of the margin expansion observed in 2026.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Consolidated revenue acceleration. TTM revenue grows 12% year over year, accelerating from 7.6% for full year 2025.
• B2B engine. The B2B segment grows 18-23% year over year and already accounts for a third of consolidated revenue, with gross bookings growing 21% in the most recent quarter.
• Guidance raised by the company itself. The company raised its full-year 2026 revenue guidance from +6-9% to +9-10% after beating its own guidance in the second quarter.
• Relative weakness in air bookings. Booked air tickets fell 5% year over year in the most recent quarter, the only operating driver with negative growth.
• Available market penetration. The company's gross bookings represent a single-digit percentage of global travel spend, estimated at more than US$2 trillion for 2026.

• Demand recurrence and predictability. Travel is a recurring, structurally growing spending category, though cyclical against macro or geopolitical shocks.
• Product differentiation. Recognized brands and proprietary distribution technology, but in a category where the consumer easily compares prices across platforms.
• Pricing power. The consolidated take rate rose from 12.4% to 12.7% year over year, supported by mix shift toward B2B more than by direct pricing power over the consumer.
• Operating leverage. EBIT margin jumped from 12.70% (full year 2025) to 15.97% (TTM) on a technology platform shared across brands, with the company's own guidance corroborating the continuation.
• Recession behavior. Discretionary travel is sensitive to the economic cycle; the company does not report data from a recent recession that would allow directly measuring the current model's resilience.
• Dependence on paid traffic channels. A significant share of traffic depends on search engines, particularly Google, which the company's own filing describes as using its position to promote its own travel services.
• Business mix shift toward B2B. The fastest-growing segment (B2B, +18-23% year over year) already accounts for a third of revenue and lifts consolidated margin through its lower relative direct-marketing-cost structure.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $1.7 bn
• !Interest coverage (EBIT / interest)7.3x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 125% of ROIC
• ✓Value creation (ROIC − 10% bar)+21pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.8x — no over-investment
• –Float / working capitalNeutral WC
• ✓Dilution (SBC % of revenue + shares)SBC 2.6% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Net cash position. Short-term cash and equivalents (US$7.127bn) exceed total debt (US$5.459bn) by US$1.668bn, after paying off the current portion of long-term debt.
• No current debt maturities. The entirety of long-term debt (US$5.459bn) has no current maturities as of the most recent period close.
• Interest coverage. TTM EBIT (US$2.507bn) comfortably covers estimated interest expense (~US$0.344bn annualized), with a substantial margin.
• Structurally negative working capital. The deferred merchant bookings liability funds part of the operation without additional own capital, a superpower of the business model rather than a liquidity risk.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Alignment via dual-class structure. Barry Diller holds 100% of the Class B shares (~32% of voting power) with an economic stake of only ~4.7% of common stock, per the most recent proxy.
• Capital allocation toward buybacks. The buyback cut the diluted count by 24% since 2022, funded by real free cash flow (not by net new debt).
• Dividend reinstatement. The quarterly dividend was reinstated in 2025 after a period without payments (2023-2024), and was raised from US$0.40 to US$0.48 per share between November 2025 and March 2026.
• Recent leadership transitions. The company's own annual filing notes that it has experienced a series of leadership transitions in recent years, a risk factor explicitly disclosed in the key-personnel section.
• Acquisition activity. US$400 million in acquisition spending in the first half of 2026, moderate relative to the period's free cash flow and with no signs of overextension.

• The market appears anchored to the full-year 2025 EBIT margin (12.7%) and has not yet fully priced in the expansion already corroborated by the company's own guidance for full-year 2026.
• The acceleration of the B2B segment (+18-23% year over year, a third of revenue) is recent and not yet fully reflected in the multiple, which remains anchored to the perception of a mature, moderate-growth business.
• The risk of disruption from agentic AI and from Google's use of its search position, explicitly mentioned in the company's own filing, weighs on the multiple more severely than the company's recent execution would suggest.

There is no particularly clear source of discount of the missing-buyers or motivated-sellers type: this is not a case of panic or abandonment. The gap between price and projected value appears to stem, rather, from the market not yet fully pricing in the B2B acceleration and margin expansion the company has been corroborating quarter after quarter.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +15%/year (+102% total): the margin of safety protects the downside. The bull (+34%/year, +328% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Disintermediation by generative and agentic AI. The company's own annual filing warns that the rapid emergence of these technologies will likely intensify competition materially.
• Dependence on Google as channel and competitor. A significant share of traffic depends on Google search, which at the same time promotes its own travel services.
• Dependence on supplier relationships. A substantial share of revenue depends on negotiated compensation with lodging suppliers, airlines, and global distribution systems.
• Regulatory risk over alternative accommodation. The new European short-term rental law, in effect since May 2026, requires registration numbers for all alternative accommodations in the European Union.
• Fraud and payment risk. The company acknowledges exposure to fraudulent bookings, identity-theft schemes, and the risk of payment processors withholding funds should its financial condition materially deteriorate.
• Expanding competition from Airbnb and Booking.com. Airbnb is expanding into tours, activities, and hotel bookings; Booking.com is expanding its flight-booking services, both encroaching on Expedia Group's core territory.
• Weakness in air bookings. Booked air tickets fell 5% year over year in the most recent quarter, the only operating driver in contraction.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: narrow moat, eroding.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 7% at a multiple/growth of 1.8 → reasonable for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 8% (EBIT/EV) + ROIC 31% → makes the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts -13% vs our 7%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor +14%/yr, bull-scenario ceiling +33%/yr over 5y and a +60% margin → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, eroding; sources: network effects, intangibles, efficient scale, cost advantage, switching costs → fails the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting -13%, within what we project (7%) — the story squares with the numbers.