Marriott International (MAR)

Total return at 5 years: -0.5%/year = -1.4% appreciation + 1.0% dividend. The target price ($361) is ex-dividend; the $19 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $310 · Multiples $306) is below the market price ($388).

Today — expensive, no margin of safety: at $388 trades ~26.9% above its value discounted to today (~$306); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Sobrevalorado: the expected total return is negative — the price already discounts a demanding scenario that, if not met, results in a loss.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$192.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($388) 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 price discounts growth (12.8%/year) above our base case (7.5%/year) → it is priced for a demanding scenario and leaves little cushion against a slowdown.

That growth implies ~$4.8 bn of owner earnings in year 5 (vs ~$3.8 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). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on EV/NOPAT. In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Enterprise-level model (§3). A hotel franchisor does not own the bricks — Marriott owns or leases less than 1% of the system's properties — so its debt is not structural to a real-estate model the way a restaurant franchisor's property portfolio is, and it falls outside the closed list where the multiple is applied to earnings. The earnings being valued are NOPAT, ahead of interest, and the bridge subtracts debt once: cash of US$0.462 billion and debt of US$16.9 billion as of June 30, 2026, against negative book equity of US$4.53 billion from two decades of buybacks. The exit multiple does not move on migration, because NOPAT is in the same after-tax units as the archetype's 18-to-24 times band. Year 0 = the trailing-twelve-month window through June 30, 2026 from XBRL: revenue US$26.904 billion, operating income US$4.250 billion, net income US$2.587 billion, operating cash flow US$3.728 billion, capital expenditure US$0.742 billion. Depreciation and amortization disclosure: the XBRL concept was abandoned in 2014, so the line is taken from the 2025 10-K cash flow statement — US$599 million, which includes depreciation and amortization classified within reimbursed expenses — and is projected forward in line with the August 3, 2026 release's guidance, which breaks out for 2026 depreciation and amortization of US$275 million on its own line, US$137 million of amortization of contract investments, and US$307 million within reimbursed expenses. No neighboring concept is substituted in. Year-1 anchor: the current guidance from the August 3, 2026 release for fiscal 2026 — gross fee revenue from royalties and management of US$6,025 to US$6,055 million (up 10.8% to 11.3% over 2025's US$5,438 million gross), adjusted EBITDA of US$5,965 to US$6,025 million (up 11% to 12% over 2025), net income excluding certain items of US$3,007 to US$3,051 million, adjusted diluted EPS of US$11.64 to US$11.81, RevPAR growth of 3.0% to 3.5%, and net rooms growth at the low end of the 4.5% to 5.0% range. The base case lands year-1 earnings at US$3.00 billion, just below the guided floor because the modeled series is GAAP net income and the guidance excludes impairments and adjustments of US$78 million net; the adverse scenario anchors below the guided floor and the favorable scenario above the ceiling. Share count path: a single path across the three scenarios, at 3.0% annual net reduction. Revealed behavior is faster — from 273.6 million average diluted shares in 2025 to 264.5 million in the quarter closed June 30, 2026, with US$3,619 million of buybacks over the trailing twelve months — and free cash flow less dividends supports roughly US$2.26 billion a year of buybacks, close to 2.5% of market value: the 3.0% path models half a point above that capacity, deliberately leaning on new debt that accompanies EBITDA growth. The divergence is disclosed here; the shortfall against the still-faster revealed pace is deliberate. The four reportable segments the filing publishes sum to US$4.172 billion in 2025 (excluding the Caribbean and Latin America and the unallocated corporate portion); company-wide net fee revenue from royalties and management is US$5,303 million. Both are considerably smaller than consolidated revenue of US$26.186 billion: the difference is cost reimbursements from centralized and property-level programs, which the company bills without markup, plus revenue from the few owned and leased properties. It is not a reconciliation gap: net fees are reported net of reimbursements, which is why the margin on consolidated revenue looks low for a royalty business.

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 $361 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $388, 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 $361 in 5 years plus $19 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 $306. Against the current market price ($388), the margin of safety is -26.9% (trades above the maximum → a premium is paid) and the total return at that price would be -0.5% annually.

• Entry multiple. At 38× on earnings, the stock pays upfront for the full execution of the company's guidance.
• Expected total return. -0% annually over five years, with -1% from price and +1% from dividends: below the 10% for an average-quality investment.
• Multiple compression. From 38× today to 25× in five years: growth cheapens the entry, but from a high level.
• Scenario range. Between -0% and -0%: the range is wide because value depends on the fifth-year margin expansion.

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

• ✓ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (103%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Return on invested capital. 26.5%, well above the 10% bar, on capital dominated by debt after two decades of buybacks.
• Cash generation. $2.99 billion of free cash flow over the trailing twelve months on net income of $2.59 billion: conversion above 100%.
• Reinvestment runway. Development pipeline of roughly 629,000 rooms, 35% of the system, with 44% under construction and growing without own capital.
• Stock-based compensation. $249 million over the trailing twelve months, 0.9% of revenue and 8.3% of free cash flow: immaterial to the metric.

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

Marriott's revenue breaks down into rooms times price: the system grows by adding third-party rooms —from 1.71 to 1.78 million between 2024 and 2025, with 703 properties and 99,459 gross rooms added— and on that base it charges a royalty tied to revenue per available room, which rose 2.0% worldwide in 2025 with average rate up 2.1% and occupancy at 69.3%. Net segment revenue is the clean read on the business: it excludes the cost reimbursements the company bills without margin. The United States and Canada is 70% of that base and grows 1.6%; the three international segments, the remaining 30%, grow 7.5%.

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).

• Room growth. 4.3% net in 2025 and guidance at the low end of the 4.5% to 5.0% range for 2026, with 99,459 gross rooms added.
• Revenue per room. 2.0% worldwide in 2025 with 0.7% in the United States and Canada; in the second quarter of 2026 the core market rose to 5.0% while the system fell 0.5% on the Middle East collapse: the engine flipped.
• Geographic mix. The international regions grow 7.5% in fees against 1.6% for the United States and Canada, but weigh only 30%.
• Margin expansion. The net margin rises through mix, because margin-free reimbursements grow slower than royalties; it is arithmetic, not efficiency.

• Royalty model on third-party assets. It owns or leases less than 1% of the system's properties; the hotel owner provides the real estate capital.
• Contractual recurrence. Contracts of 10 to 25 years in franchising and 20 to 30 initial years in management, with renewals of ten years or more.
• Relevance in ten years. Demand for branded lodging is structural; the risk is not that it disappears but who controls the booking.
• Pricing power. Average rate rose 2.1% in 2025, just above services inflation: price is set by the hotel market, not the brand.
• Recession behavior. Revenue per room and incentive fees fall together in a travel downturn; the model is defensive but not immune.

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 $0 bn
• !Interest coverage (EBIT / interest)5.3x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 103% of ROIC
• ✓Value creation (ROIC − 10% bar)+17pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 1.2x
• !Float / working capitalConsumes cash $0.1 bn (positive WC)
• ✓Dilution (SBC % of revenue + shares)SBC 0.9% 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.

• Interest coverage. Operating income of $4.141 billion against interest expense of $0.809 billion, both fiscal 2025: 5.1 times.
• Negative equity. $4.53 billion negative at June 30, 2026, a consequence of $27,900 million of treasury stock at cost, not of losses.
• Debt against cash flow. $16.46 billion of long-term debt against $2.99 billion of annual free cash flow: high but serviceable leverage.
• Capital needs. Capital expenditures of $604 million on revenue of $26,186 million in 2025: growth does not consume the company's own cash.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

Fiscal 2025 allocation: $3,300 million of buybacks, $718 million of dividends, and $954 million between capital expenditures and asset acquisitions. Buybacks dominate and a portion is supported by new debt —$3,436 million issued against $1,309 million repaid and $403 million net from commercial paper and the credit facility—, consistent with a stated policy of sustaining leverage as earnings grow.

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

• Alignment. The family and related holders total 17.57% net of double counting, of which 13.22% belongs to J.W. Marriott Jr., Deborah M. Harrison, and David S. Marriott, who chairs the board: real ownership and a long horizon.
• Capital allocation. $3,300 million of buybacks and $718 million of dividends in 2025 on capital expenditures of $604 million: it returns almost everything it generates.
• Use of debt. Part of the buyback is financed with net debt issuance; it is a stated policy and sustainable as long as earnings grow, but it reduces headroom.
• Candor in reporting. The filing plainly discloses the difficulty of collecting damages for breach of contract and the risk from artificial-intelligence intermediaries.

• International revenue per available room fell in the second quarter of 2026 on the Middle East collapse (−33.1% system-wide), while the United States and Canada —55% of the company's net fee revenue— recovered to 5.0%; the market punishes the entire quarter without distinguishing which of the two engines is actually faltering.
• The accounting result is buried under cost reimbursements: on consolidated revenue of $26.2 billion the net margin looks like 9.6%, when the real economics are those of a royalty business with $5.3 billion of net revenue.
• The Middle East revenue-per-available-room decline, over 40% in the second quarter of 2026, dragged down the entire Europe, Middle East, and Africa region and muddied the reading of the quarter.
• Negative book equity and $16.5 billion of debt scare off anyone screening by balance sheet, even though they are a consequence of buybacks and not a solvency problem.

Perception is somewhat worse than reality in the accounting read —the consolidated margin and negative equity hide a royalty business with a very high return on capital— but that is not enough for a discount: the price already reflects execution of the guidance. The source of the discount exists, but it is small against the multiple being paid.

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 -9%/year (-38% total): the margin of safety protects the downside. The bull (+6%/year, +32% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Booking channel. The filing warns that artificial-intelligence capabilities from existing and emerging intermediaries could erode brand loyalty and raise the cost of distribution.
• Contract termination. Agreements can be terminated for owner default or bankruptcy, and the filing discloses a history of difficulty collecting damages.
• Travel cycle. Rate, occupancy, and incentive fees fall together in a downturn, and project entries slow when financing becomes more expensive.
• Geopolitics. Revenue per room in the Middle East fell more than 40% in the second quarter of 2026 and dragged down its entire region.
• Cybersecurity. The Starwood incident remains in litigation, with long-term commitments before the Federal Trade Commission and 49 state attorneys general.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  A wide moat and ROIC 27% above the 10% bar, but the price sits above value (no margin) → great business, expensive.

• Peter Lynch Growth at a reasonable price (GARP)

  A stalwart growing 8% at a multiple/growth of 5.0 → expensive for its growth.

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

  Earnings yield 4% (EBIT/EV) + ROIC 27% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 13% vs our 8%: priced for perfection, no favorable mispricing.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -10%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: intangibles, efficient scale, network effects, switching costs, cost advantage → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  The price demands 13% growth, far above our 8% — heroic assumptions.