A good time to buy? Mariott Internatinal, Inc

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A GOOD TIME TO BUY?

Mariott Internatinal, Inc.

Delta Air Lines, Inc.

Walt Disney Holding Co.

Submitted

Dr. Halvard Nystrom

EMGT 452, NTU EF-7020-T – Advanced Financial Management

Department of Engineering Management

University of Missouri-Rolla

Prepared by

Brad Blau

Alfredo Carerro

Benjamin Kroeter

May 10, 2002

Figure 1: Marriott International stock prices since March 1998. 7

Figure 2: Marriott Corporation, Inc. Historical Dividends per Share. 9

Figure 3: Histories of Earnings per Share, Marriott International, Inc. 10

Figure 4: Projected earnings per share, Marriott International, Inc. 11

Figure 5: Pre-tax Profit Margin for Marriott International, Inc. 12

Figure 6: Marriott International, Inc. Return on Equity 13

Figure 7: Marriott International, Inc. ROE, ROA and ROIC 13

Figure 8: Industry Comparisons with Marriott International, Inc. 14

Figure 9: Intrinsic Stock and Current Stock Selling Prices. 15

Figure 10: P/E and P/S Values for Marriott International, Inc. 16

Figure 11: Trailing 12 Months P/E and P/S comparison with industry. 17

Figure 12: Comparisons between industry and Marriott. 17

Figure 13: Ratios. 18

Figure 14: Delta Air Lines, Inc. stock prices since March 1997. 23

Figure 15: Delta Air Lines, Inc. historical dividends per share. 24

Figure 16: History of Earnings per Share, Delta Air Lines, Inc. 25

Figure 17: Projected earnings per share, Delta Air Lines, Inc. 25

Figure 18: Pre-tax Profit Margin for Delta Air Lines, Inc. 26

Figure 19: Delta Air Lines, Inc. Return on Equity. 26

Figure 20: Marriott International, Inc. ROE, ROA and ROIC. 26

Figure 21: Industry Comparisons with Delta Airlines, Inc. 27

Figure 22: P/E and P/S Values for Delta Airlines, Inc. 28

Figure 23: Trailing 12 Months P/E and P/S comparison with industry. 28

Figure 24: Comparisons between industry and Delta 29

Figure 25: Ratios. 29

Figure 26. Disney International stock prices since March 1997 36

Figure 27: Disney Corporation historical dividends per share. 39

Figure 28: History of Earnings per Share, Disney Corporation. 40

Figure 29: Projected earnings per share, Disney Corporation. 41

Figure 30: Pre-tax Profit Margin for Disney Corporation 42

Figure 31: Disney Corporation Return on Equity 42

Figure 32: Disney Corporation ROE, ROA and ROIC 43

Figure 34: Intrinsic Stock and Current Stock Selling Prices 44

Figure 35: P/E and P/S Values for Disney 45

Figure 36: Trailing 12 Months P/E and P/S comparison with industry. 46

Figure 37: Growth comparisons between Disney and Industry 47

Figure 38: Ratios 47

Table 1: Summary of questions and answers for analysis of Mariott 48

Table 2: Summary of questions and answers for analysis of Delta 48

Table 3: Summary of questions and answers for analysis of Disney 48

Introduction

As part of the course NTU EF-7020-T and EMGT 452, Financial Management, taught at the University of Missouri- Rolla, the students choose a project and turn it in to the course instructor. The team members on this project are:

Mr. Brad Blau
Mr. Alfredo Carrero
Mr. Benjamin Kroeter

The team will evaluate certain related industry stocks and determine whether they are valued appropriately to purchase now. The team selected the following three stocks:

Marriott International Inc.
Delta Air Lines Inc.
Walt Disney Holding Co.

Project Scope

The scope of the following sections of the project will consist of the following:

Provide a brief historical perspective of the selected companies.
An assessment of the selected companies using financial and stock evaluation tools taught in this course.
A recommendation, based upon that assessment, whether or not it is a good opportunity to purchase the selected stock.

Evaluation Criteria for Analysis

To keep the evaluation consistent, our team developed a consistent approach to evaluate each company. We endeavored to ensure an “ apples to apples” comparison of the companies, and developed a set of questions we applied to the companies under scrutiny. Based upon the responses to those sets of questions, we would make recommendations whether we as a team would advocate the purchase of these individual stocks. A primary motivation for this research is that the post September 11, 2001 condition may afford a window of opportunity for enhancing one’s portfolio with these stocks.

We selected the following questions to base our analysis on:

Is the price of the stock in the buy zone of greater than $10 and less than $60?

Rationale: Stocks should be mature enough to be priced higher than “penny stocks,” yet low enough to take advantage of lot purchases.

Does the company keep their debt “reasonable”?

Rationale: Long-term debt to equity ratios, according to many analysts, should not exceed .5 (or 50%). This may be problematic, however, depending on the company.

Does the company pay a dividend?

Rationale: A company should be making profits and sharing those profits with the stockholder. It is not enough to simply plow profits back into the company; the company must also actively treat their stockholders well. Stockholders should ask themselves “Would I be satisfied if I used the product of this company”?

Are the historical and projected earnings positive?

Rationale: It is important that companies have an established growth pattern over time. This indicates the products are competitive, and that the company has established a niche. It is also important the company projects its earnings and has a plan in place to achieve the expected earnings.

Is management controlling costs and revenue?

Rationale: Management of the company must have a vision as to where they see the company five years from now. If they do, they should discuss that plan and modify that plan if unforeseen circumstances occur. Can they react? Is the company too debt ridden to react? This question may be a challenge to answer, as history may not be a good indicator of the future.