Hilton Grand Vacations (HGV)

Timeshare vacation company Hilton Grand Vacations (NYSE:HGV) missed Wall Street’s revenue expectations in Q3 CY2025, with sales flat year on year at $1.3 billion. Its non-GAAP profit of $0.60 per share was 38.5% below analysts’ consensus estimates.

Company Overview

Spun off from Hilton Worldwide in 2017, Hilton Grand Vacations (NYSE:HGV) is a global timeshare company that provides travel experiences for its customers through its timeshare resorts and club membership programs.

Airlines, hotels, resorts, and cruise line companies often sell experiences rather than tangible products, and in the last decade-plus, consumers have slowly shifted from buying "things" (wasteful) to buying "experiences" (memorable). In addition, the internet has introduced new ways of approaching leisure and lodging such as booking homes and longer-term accommodations. Traditional airlines, hotel, resorts, and cruise line companies must innovate to stay relevant in a market rife with innovation.

Hilton Grand Vacations's primary competitors include Marriott Vacations Worldwide (NYSE:VAC), Wyndham Destinations (NYSE:WYND), Bluegreen Vacations (NYSE:BXG), Hyatt Residence Club (owned by Hyatt Hotels NYSE:H) and Diamond Resorts (owned by Apollo NYSE:APO).

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Hilton Grand Vacations’s sales grew at an incredible 32% compounded annual growth rate over the last five years. Its growth beat the average consumer discretionary company and shows its offerings resonate with customers.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new property or trend. Hilton Grand Vacations’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 12.5% over the last two years was well below its five-year trend.

We can dig further into the company’s revenue dynamics by analyzing its number of members and conducted tours, which clocked in at 721,488 and 232,035 in the latest quarter. Over the last two years, Hilton Grand Vacations’s members averaged 19.2% year-on-year growth while its conducted tours averaged 19.7% year-on-year growth.

This quarter, Hilton Grand Vacations missed Wall Street’s estimates and reported a rather uninspiring 0.5% year-on-year revenue decline, generating $1.3 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 11.1% over the next 12 months, similar to its two-year rate. This projection doesn't excite us and implies its products and services will face some demand challenges.

Hilton Grand Vacations’s operating margin has been trending down over the last 12 months and averaged 1.2% over the last two years. Although this result isn’t good, the company’s elite historical revenue growth suggests it ramped up investments to capture market share. We’ll keep a close eye to see if this strategy pays off.

This quarter, Hilton Grand Vacations generated an operating margin profit margin of negative 51.3%, down 63.9 percentage points year on year. This contraction shows it was less efficient because its expenses increased relative to its revenue.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Hilton Grand Vacations’s EPS grew at an astounding 35.1% compounded annual growth rate over the last five years, higher than its 32% annualized revenue growth. However, we take this with a grain of salt because its operating margin didn’t improve and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

In Q3, Hilton Grand Vacations reported adjusted EPS of $0.60, down from $0.67 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term adjusted EPS growth than short-term movements. Over the next 12 months, Wall Street expects Hilton Grand Vacations’s full-year EPS of $1.72 to grow 119%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Hilton Grand Vacations has shown impressive cash profitability, giving it the option to reinvest or return capital to investors. The company’s free cash flow margin averaged 14.5% over the last two years, better than the broader consumer discretionary sector. The divergence from its underwhelming operating margin stems from the add-back of non-cash charges like depreciation and stock-based compensation. GAAP operating profit expenses these line items, but free cash flow does not.

Hilton Grand Vacations broke even from a free cash flow perspective in Q3. This result was good as its margin was 2.9 percentage points higher than in the same quarter last year, but we wouldn’t read too much into the short term because investment needs can be seasonal, causing temporary swings. Long-term trends carry greater meaning.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

Hilton Grand Vacations historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 3.4%, lower than the typical cost of capital (how much it costs to raise money) for consumer discretionary companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Hilton Grand Vacations’s ROIC has unfortunately decreased. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Hilton Grand Vacations’s $7.28 billion of debt exceeds the $215 million of cash on its balance sheet. Furthermore, its 8× net-debt-to-EBITDA ratio (based on its EBITDA of $898 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Hilton Grand Vacations could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Hilton Grand Vacations can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

We struggled to find many positives in these results. Its revenue missed and its EPS fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 3.6% to $42.60 immediately after reporting.

Updated: December 4, 2025 at 10:03 PM EST

Before making an investment decision, investors should account for Hilton Grand Vacations’s business fundamentals and valuation in addition to what happened in the latest quarter.

We see the value of companies helping consumers, but in the case of Hilton Grand Vacations, we’re out. First off, its revenue growth was uninspiring over the last five years, and analysts expect its demand to deteriorate over the next 12 months. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its number of conducted tours has disappointed. On top of that, its Forecasted free cash flow margin suggests the company will ramp up its investments next year.

Hilton Grand Vacations’s P/E ratio based on the next 12 months is 9.9x. While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now.

Wall Street analysts have a consensus one-year price target of $51.70 on the company (compared to the current share price of $42.34).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.