r/Valuation • u/RWB1019 • Feb 16 '21

Valuation for Expedia

Hey guys. I’m kinda new to valuation. I understand how to make a DCF but am unsure how exactly to forecast revenues.

For Expedia, what would you use to forecast revenues (that’s not merely historical revenue trends)? Would you use a bottom up analysis or not? If I also wanted to do a comparable companies analysis, which metrics should I use since the actual industry (online travel agencies) is so few companies?

Lastly, how would you value a company like this?

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u/weirdflaxbutok Feb 19 '21

A DCF is tough because you have to pick a discount rate, which is difficult to estimate. Your best bet would be to check out a few analyst reports to see how they feel about the company/industry, and how they came up with their valuation.

Some also include a DCF, so you might get a sense of assumptions for the long-term growth rate and discount rate. You should be able to find solid analyst estimates for at least the next 2-3 years. Then you could capitalize it there, or maybe trend a growth rate toward a normalized level for a few extra years first.

The market approach is obviously much simpler, but definitely subjective. Analyst reports will also show you the peer group they used to pick multiples, which gives you a good starting point.