1.08(0.89%) Volume: 1,065,157 8:08PM EDT| Market Cap : 39.56 B | Enterprise Value : 50.58 B | P/E (TTM) : 29.44 | P/B : 32.60 |
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Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation. Marriott International's forward rate of return for was 20.39%.
During the past 13 years, Marriott International's highest Forward Rate of Return was 25.10. The lowest was 2.60. And the median was 14.20.
Unlike the Earnings Yield %, the Forward Rate of Return uses the normalized Free Cash Flow of the past seven years, and considers growth. The forward rate of return can be thought of as the return that investors buying the stock today can expect from it in the future.
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
| Marriott International Quarterly Data | ||||||||||||||||||||
| Sep14 | Dec14 | Mar15 | Jun15 | Sep15 | Dec15 | Mar16 | Jun16 | Sep16 | Dec16 | Mar17 | Jun17 | Sep17 | Dec17 | Mar18 | Jun18 | Sep18 | Dec18 | Mar19 | Jun19 | |
| Forward Rate of Return (Yacktman) % |
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23.18 | 23.12 | 23.90 | 23.32 | 20.39 |
* The bar in red indicates where Marriott International's Forward Rate of Return (Yacktman) % falls into.
Forward Rate of Return is a concept that Don Yacktman uses in his investment approach. Yacktman explained the forward rate of return concept in detail in his interview with GuruFocus. Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation. He said in the interview (March 2012, when the S&P 500 was at about 1400):
If the business is stable, this calculation is fairly straightforward. For instance, on the S&P 500 we would normalize earnings. We would then calculate what percentage of those earnings are not reinvested in the underlying businesses and are therefore free. Historically, for the S&P 500, this has been just under 50% of earnings. Currently, we expect the S&P to earn about 70 on a normalized basis, a number which is far below reported earnings due to our adjusting for record high profit margins. $70 X ½ / 1400 gives you a normalized free cash flow yield of approximately 2.5%.
The historical real growth rate of the S&P 500 (companies) is about 1.5%. Assuming an inflation rate of 2.5%, the forward rate of return on an investment in the S&P 500 is about 6.5% today (2.5% free cash flow yield plus 1.5% real growth plus 2.5% inflation).
Marriott International's Forward Rate of Return of Jun. 2019 is
| Forward Rate of Return | = | Normalized Free Cash Flow | / | Price | + | 5-Year EBITDA Growth Rate |
| = | 4.36514286 | / | 140.29 | + | 0.1728 | |
| = | 20.39 % |
* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.
Unlike the Earnings Yield, the Forward Rate of Return uses the normalized Free Cash Flow of the past seven years, and considers growth. The forward rate of return can be thought of as the return that investors buying the stock today can expect from it in the future.
For the growth part of the Forward Rate of Return calculation, GuruFocus uses the 5-year average growth rate of EBITDA per share as the growth rate, and the growth rate is always capped at 20%. For the Free Cash Flow we use per share data averaged over seven years. The reason we use seven years is because research shows that seven years is the length of the typical business cycle.
In the Forward Rate of Return calculation, the growth rate is added directly to today's free cash flow yield. Therefore the calculation is reliable only if the company can grow at the same rate in the future as it did in the past. Investors should pay close attention to this when researching growth stocks. More accurate measurement return returns are Return on Capital.
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