Expedia, Inc. (EXPE)

Discount cash flow analysis

Sell Overvalued by 78.7%

5% margin of safety What's this?


How does this work?

This is an interactive analyst report for Expedia, Inc., based on a discounted cash flow valuation approach.

You can modify the assumptions and the valuation will be updated automatically. You can also save and share your valuation.

Values in $ millions
2007 2008 2009 2010 2011 2012 2013 2014

What will the revenues be in the future?

Growth beyond year three is driven by the terminal growth rate.

Sensitivity matrix

Discount Rate %

  -1% $23.44 $23.12 $22.82
Terminal Growth% 0 $23.53 $23.21 $22.91
  +1% $23.63 $23.31 $22.99

How does a change in discount rate or terminal growth affect valuation?

This table shows the sensitivity of the valuation to two key variables - the discount rate and the terminal growth rate

Valuations and comments

  • Valuecruncher created a new valuation of $92.14 (overvalued by 15.3%) - over 1 year ago
  • SethWellbourne created a new valuation of $10.50 (undervalued by 17.85%) - almost 9 years ago
  • GordonGekko created a new valuation of $9.50 (undervalued by 28.73%) - almost 9 years ago
  • TheCrunchBlog created a new valuation of $23.21 (undervalued by 20.45%) - over 9 years ago


Expedia (EXPE) – the on-line travel site looks a buy

This valuation is part of this blog post:


EXPE grew revenues from US$1.8 billion in 2004 to US$2.7 billion in 2007 – a 14% compound annual growth rate. Our assumptions of revenues for the next three years are US$3.0 billion in 2008 growing to US$3.75 billion in 2010 – a 12% compound annual growth rate (2007-10). We have projected EBITDA margins to be flat at 25% to 2010. We have used a terminal growth rate of 3.75%. We calculated this terminal growth rate based on year three (2009-10) growth of 10% dropping to a 3.0% stable growth rate by year 10. We used a terminal capital expenditure number of US$150 million. We have used a WACC (discount rate) of 12.0%.

The key assumptions as we see them are:

EXPE Revenues for the next three years. We believe that 12% per annum growth (2007-10) is a reasonable estimate.

EXPE WACC. We view EXPE’s WACC in the 11-13% range. We took a mid-point. This discount rate is intended to reflect the potential uncertainties of the EXPE cash flows in the near term.

By TheCrunchBlog, over 9 years ago

The boring details

All amounts in millions Figures
Enterprise Value: 31,652
Net Debt (Long-term borrowings less cash): 467
Equity Value: 5,523
Number of Shares Outstanding: 286,000,000
Calculated value per share: $23.21

Enterprise Value is the present value of the post-tax cash flows for a business into the future.

Calcuation of EV


  • C1, C2, C3 - the cash flow in period 1, 2, 3, ...
  • r - the discount rate

To capture the cash flows into the future a terminal value is calculated via a perpetuity calculation -
based on the final years forecast post-tax free cash flow.



  • Cn - the cash flow in the final forecast period.
  • LTG - the long-term growth rate
  • r - the discount rate
  • g - the terminal growth rate

The Capital Asset Pricing Model (CAPM) is used to determine the equity component in the discount rate.

CAPM model


  • rt - the risk free rate
  • t - the tax rate
  • B - the beta of the company
  • MRP - the Market Risk Premium

Valuecruncher uses an estimate of Weighted Average Cost of Capital (WACC) to determine the discount rate in the calculation.