About Marriott International
Willard and Alice Marriott were onto something pretty impressive back in the mid-to-late 1920s.
What initially began as a root beer stand (no, we’re not kidding) grew into a restaurant chain and ultimately, one of the world’s most well known, largest hotel companies in the world, Marriott.
With around 322 locations in the United States, approximately 120,000 employees worldwide and reportedly 18.43% market share in the space in which it operates, broadly, the hospitality industry, Marriott is one of the world’s most prominent hotel operators and franchisors.
In the industry, the major players in the space are known for having a handful of different portfolio brands associated with its core umbrella company and Marriott isn’t an exception.
For instance, the company is home to practically everything from high-end lodging venues to some of the more comfortable, quaint destinations as well, again, not to mention everything in between.
We thoroughly enjoy seeing just how diversified Marriott’s destination portfolio is, as this is a company that undoubtedly appeals to the masses, whether it’s the family crammed in a car that just needs somewhere to stay for the night or the wealthy executive looking to spend a few nights in a big city (while sleeping on to die for soft pillows, of course), it is clear that Marriott has a large current and potential customer base.
It is also clear that while the company does maintain a strong position in the industry, it does brush up against some tough competition, including the likes of Hilton Worldwide, Hyatt, IHG Hotels & Resorts and without a shadow of a doubt, travel disruptor and innovator, Airbnb.
In wrapping up our introducing of Marriott, its line of business, its portfolio and its competitive landscape, it must be briefly noted that this company, like all of its previously mentioned competitors is particularly vulnerable to short, intermediate and long-term threats of COVID-19 and other public health emergencies and crises as well as what we personally view as long-term threats (to the lodging industry, specifically), the gradual yet consistent movement many are making towards remote work.
What if the executive we mentioned before works for a company that opts to have its executives perform the majority of their meetings over Zoom or another virtual communication network?
This trend will undoubtedly hurt the hotel industry overall, as the lodging space, at its core, is an in-person, face-to-face connection business.
Although it is our personal opinion that it would be a shame if most of the global business workforce went full remote, it is nevertheless a likely possibility over the next few decades, if not this current decade.
At any rate, this is something to consider if one is pondering an investment in the hotel industry for the long haul.
Now, let’s get into Marriott specifically and try to figure out whether or not the stock itself (NASDAQ: MAR) is worth considering an investment in for the months, years, decades and centuries to come.
Marriott’s stock financials
With a prevailing market capitalization of a hair under $51 billion, a share price of $162.61, a present price-to-earnings (P/E) ratio of 22.67 and an annually distributed dividend to its shareholders of $1.60, Marriott International isn’t off to the worst start.
For instance, the company’s share price has come down in recent weeks, down around 11% this past month’s span of time, which is more than likely the reason its price-to-earnings ratio has dribbled down to more favorable levels, now just slightly above the fair value benchmark of 20.
All of this to say, Marriott’s share price is still trading at a little (and we seriously mean a little) bit of a premium, but to us, not one large enough to completely discourage us from further investigating this company and its relevant core financials.
When it comes to the company’s balance sheet, Marriott’s executive team is tasked with tending to around $24.8 billion in terms of total assets along with approximately $24.2 billion in total liabilities.
As we have alluded to in previous stock analysis articles, particularly in regards to companies that predominantly operate in the real estate sector, real estate is (and to a large extent should be) the definition of “the long game.”
Namely, in many other instances we would’ve been slightly concerned given that the company’s total assets are for all intents and purposes the same as the amount of its total liabilities, however, for companies operating in the real estate sector and generating cash flow primarily from its guests that stay in its properties, of which are likely being paid down over the long haul, this makes sense to us and therefore we aren’t going to be losing much (if any) sleep over Marriott’s total liabilities being on the higher end.
Onto the company’s income statement, 2020 was a bad, bad year for this company, as it was for many other companies, especially those in the travel and lodging sectors.
Obviously, Marriott was in no way, shape or form an exception.
For instance, the company’s total revenue in 2018 stood at a hardy $20.7 billion as well as around $20.9 billion the following year and then subsequently plummeted to $10.5 billion in 2020, shallowly rising back up to approximately $13.8 billion the following year, up to its latest reported revenue figure on TD Ameritrade’s platform, $20.7 billion.
From our vantage point, the roughly $10 billion drop in total annual revenue between 2019 and 2020 was to be expected (not that this makes it any more easily digestible) and more so, just highlights the already mentioned vulnerability this company has to extraordinary, global health events.
Frankly, we don’t feel the need to go on and on about how this company is particularly sensitive to public health emergencies, shutdowns thereof, or the continuance of the exponential rise in remote work, however, it is still important to keep these factors and considerations in perspective, especially for a company such as Marriott International.
Lastly, it is also our opinion that, excluding any other extraordinary public health emergencies or other earth-shattering events, it is quite reasonable to expect this company’s total annual revenue to remain somewhere around $20 billion each year for the foreseeable future, even with the current overall state of the economy, specifically, inflation.
From the perspective of the company’s cash flow statement, Marriott’s net income since 2018 has been consistent overall, however, of course, 2020 was the company’s only negative year during this time frame, tucked in at -$267 million, which, thankfully, wasn’t all that bad given that the company’s net income the following year was reported as just under $1.1 billion.
We’d say that was a strong recovery, which also speaks to the company’s relative economic resilience.
Marriott’s stock fundamentals
Given the company’s comparative dominance and all in all strong footing in the hospitality and lodging industries, we hoped that it had a correspondingly fortified trailing twelve month (TTM) net profit margin to show for it.
That it did.
Specifically, according to TD Ameritrade’s platform, Marriott’s TTM net profit margin is 11.35% compared to the industry’s average of 5.41%, which to us is a notable yet honestly not miraculous difference.
Not to sound too harsh, but we’re just glad that Marriott’s executive team is getting the job done on the net profit margin front, handsomely outscoring the industry’s average as it absolutely should.
Finally, when it comes to the company’s TTM returns on both assets and investment, Marriott’s’, according to TD Ameritrade’s platform, are both slightly higher than the industry’s averages, both of which stand at 8.14% and 11.06% to Marriott’s’ 9.36% and 12.88%, respectively.
Obviously, this is a good thing as well and implies that Marriott’s executives have run a tight ship in terms of being efficient with the company’s capital while generating outsized returns and net profit margins for the company and its shareholders.
Should you buy Marriott stock?
Marriott International and the various staples within its property portfolio is itself a staple in the hospitality sector.
Yes, COVID-19 and other public health threats will undoubtedly hurt this company more than they will help, however, for an investor who is pondering deploying some of their capital into the space, Marriott’s stock (NASDAQ: MAR) doesn’t appear to be a terrible option at all.
Nevertheless, given its impressive (but again, expected) TTM net profit margin, its footing and market share in the industry along with its COVID-19 sensitivities and its stock being just slightly overvalued at the time of this writing, we think it would make the most sense to give this company’s stock a “hold” rating.
DISCLAIMER: This analysis of the aforementioned stock security is in no way to be construed, understood, or seen as formal, professional, or any other form of investment advice. We are simply expressing our opinions regarding a publicly traded entity.