After conducting an extensive analysis of Host Hotels and Resorts over the course of the semester, I have gained a unique ability to examine the financial soundness of a company and its outlook into the future. 

Before jumping into analyzing the financial statements, I conducted a substantial amount of research about critical elements of my company. I was able to identify their competitors, study their unique strategy, and recognize factors that influence the general industry in which they operate. After understanding the ins and outs of my company, I was ready to examine their financial statements, create proformas for their future outlook, and determine the firms true intrinsic value to an investor. Along the way I gained a working knowledge of using Microsoft Excel and other modeling programs. 

Not only did I gain knowledge of my own company but I also gained knowledge on some of the biggest competitors in the industry such as Ryman Hospitality Properties (RHP), Park Hotels and Resort's (PK), and Diamond Rock Hospitality Trust (DRH). 

Final Valuation

The overall value estimate of of HST was $16.95 according to figure 5.7. This estimate was taken as an average of the Free Cash Flow Valuation and the Market Multiples since these models best reflect the intrinsic value of the firm. I chose to omit the Residual Operating Income and Dividend Discount Model since the metrics and methods used in calculations for those models did not suit the valuation of HST in a fair way. 

The Dividend Discount Model did not portray an accurate reflection of value since the company temporarily suspended dividend payout starting the second quarter of 2020 through the first quarter of 2021. Although their is a forecasted divided for FY 2022 it is only forecasted to be $0.15 which is extremely low. The value per share for this method of $2.01 was extremely low compared to the Free Cash Flow Model and Market Multiples Model, therefore, it was not used in my overall valuation. 

The Residual Operating Income model (ROPI) was omitted because the actual NOPAT values in FY 2020 and FY 2021 were outliers as a result of negative EBIT from the pandemic. The ROPI model estimation put the firms value in the negatives at -$17.36. I omitted this from the overall valuation to avoid penalizing the company for the losses during COVID. 

My overall value estimate using the Free Cash Flow and Market Multiples Model put the intrinsic value of HST at $16.95. As mentioned in a prior post, the current market price per share of HST is $17.69. This means that the stock is overvalued and now might not be the best time to buy. 

** Full calculations for the final valuation can be found in the attached Excel file here

Investment Recommendation

After taking into account all of the different aspects analyzed, I would recommend to investors to buy and hold HST. Although HST is slightly overvalued as of currently, I believe that the free cash flow valuation has promising proformas about the growth of key metrics such as revenues, gross profit, and operating income. The growth outlook within the next few years is forecasted to be high as a result of recovering revenues but still remain consistent throughout the lifetime of the company. I believe that this investment is also a safe investment. After analyzing different debt ratios and examining the impact of hidden liabilities on the balance sheet, the company does not demonstrate any risk of default according to the ratios I calculated. Additionally, the company has demonstrated their resilience throughout the pandemic and is starting to see revenues return just two years after its aftermath. In my opinion, I think that HST has the potential of generating a steady return on its investment throughout its lifetime, and is a good option for an investor seeking minimal risk with gradual returns over the long run. I would reccomend buying and holding HST.