Can Hilton Worldwide Holdings Inc. (HLT)’s Book to Market of 0.026831 Tell the Whole Story?

Hilton Worldwide Holdings Inc. (HLT) currently has a book to market ratio of 0.026831. A ratio used to find the value of a company by comparing the book value of a firm to its market value. Book value is calculated by looking at the firm’s historical cost, or accounting value. BTM is a comparison of a company’s net asset value per share to its share price. This is a useful tool to help determine how the market prices a company relative to its actual worth. A ratio greater than one indicates an undervalued company, while a ratio less than one means a company is overvalued. Value managers seek out companies with high BTMs for their portfolios.

Hilton Worldwide Holdings Inc. (HLT) has a current ERP5 Rank of 2630. The ERP5 Rank may assist investors with spotting companies that are undervalued. This ranking uses four ratios. These ratios are Earnings Yield, ROIC, Price to Book, and 5 year average ROIC. When looking at the ERP5 ranking, it is generally considered the lower the value, the better.

Looking at some ROIC (Return on Invested Capital) numbers, Hilton Worldwide Holdings Inc. (HLT)’s ROIC is 4.257618. The ROIC 5 year average is 0.22212. ROIC is a profitability ratio that measures the return that an investment generates for those providing capital. ROIC helps show how efficient a firm is at turning capital into profits.

We can now take a quick look at some historical stock price index data. Hilton Worldwide Holdings Inc. (HLT) presently has a 6 month price index of 0.903216. The price index is calculated by dividing the current share price by the share price six months ago. A ratio over one indicates an increase in share price over the period. A ratio lower than one shows that the price has decreased over that time period. Looking at some alternate time periods, the 12 month price index is 0.870449 and the five year is 1.656473. Narrowing in a bit closer, the 3 month is 0.967284, and the 1 month is currently 1.002505.

At the time of writing, Hilton Worldwide Holdings Inc. (HLT) has a Piotroski F-Score of 6. The F-Score may help discover companies with strengthening balance sheets. The score may also be used to spot the weak performers. Joseph Piotroski developed the F-Score which employs nine different variables based on the company financial statement. A single point is assigned to each test that a stock passes. Typically, a stock scoring an 8 or 9 would be seen as strong. On the other end, a stock with a score from 0-2 would be viewed as weak.

EBITDA/EV

EBITDA/EV stands at 0.063734.
This multiple is similar to Earnings Yield, but here we use Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) as Nominator). By doing this, we can compare companies with a different capital structure and capital expenditures. This way it gives a much better idea of the value of a company compared to the popular P/E ratio. As O’Shaughnessy explaines:

” Stocks that have very high debt levels often have low PE ratios, but this does not necessarily mean that they are cheap in relation to other securities. Stocks that are highly leveraged tend to have far more volatile PE ratios than those that are not. A stock’s PE ratio is greatly affected by debt levels and tax rates, whereas EBITDA/EV is not. To compare valuations on a level playing field, you need to account for how a company is financing itself and then compare how relatively cheap or expensive it is after accounting for all balance sheet items.” – James P. O’Shaugnessy in What works on Wall Street

You can think of it as the taking all the revenue and subtracting the costs that solely go into running the business. The downside of EBITDA is that it can be abused by companies declaring as “one-off” costs things that should really be considered normal costs. We use the EBITDA of the last 12 months.

EBITDA/EV

EBITDA/EV stands at 0.063734. This multiple is similar to Earnings Yield, but here we use Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) as Nominator). By doing this, we can compare companies with a different capital structure and capital expenditures. This way it gives a much better idea of the value of a company compared to the popular P/E ratio. As O’Shaughnessy explaines:

“Stocks that have very high debt levels often have low PE ratios, but this does not necessarily mean that they are cheap in relation to other securities. Stocks that are highly leveraged tend to have far more volatile PE ratios than those that are not. A stock’s PE ratio is greatly affected by debt levels and tax rates, whereas EBITDA/EV is not. To compare valuations on a level playing field, you need to account for how a company is financing itself and then compare how relatively cheap or expensive it is after accounting for all balance sheet items.” – James P. O’Shaugnessy in What works on Wall Street

You can think of it as the taking all the revenue and subtracting the costs that solely go into running the business. The downside of EBITDA is that it can be abused by companies declaring as “one-off” costs things that should really be considered normal costs. We use the EBITDA of the last 12 months.

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