$HGV: Potential Future Returns
Different scenarios of buybacks, growth, and multiples.
In a recent Research Note, I went over some past examples of where buybacks drove most of the returns, versus growth in earnings or FCF, multiple expansion, and other returns to shareholders via dividends.
I then shared a Research Note discussing HGV’s (Hilton Grand Vacations) buybacks, FCF growth, and multiple expansion at a high level. I also provided comparisons to VAC (Marriott Vacations Worldwide) and TNL (Travel + Leisure Co.), which highlighted why I am currently more focused on HGV.
In the following Research Note, I provide scenarios for HGV’s potential future returns, with varying combinations of buybacks, FCF growth, and multiples.
Hilton Grand Vacations (HGV) Scenarios
At a high level, HGV today is interesting, given their large buybacks, solid growth prospects, and low multiple.
From this, HGV could benefit from continued returns to shareholders + FCF growth + multiple expansion, similar to the AN, DDS, and AZO examples referenced earlier.
With AN, DDS, and AZO, I showed at a simplistic level that total returns = buybacks + FCF growth + multiple expansion. If we did the same with HGV, the total returns would be quite attractive at the current buyback yield and with just a little growth, even assuming no multiple expansion.
Below, I go into much more detail, sharing multiple scenarios for potential returns for HGV.
Broken out by buybacks, FCF growth / declines, and multiple expansion / contraction (and discussing important nuances and things to keep in mind with HGV, related to these factors).
And over the same amount of time as the three previous examples (and while this is a longer projection period, the returns over much shorter time frames are also shared below, as well as the annualized returns).
I will share any follow-up items (including any potential modeling updates) within the corresponding thread in the Substack Chat.
Enjoy.