Hilton Grand Vacations (HGV)

Timeshare vacation company Hilton Grand Vacations (NYSE:HGV) missed Wall Street’s revenue expectations in Q4 CY2025 as sales rose 3.8% year on year to $1.33 billion. Its non-GAAP profit of $0.88 per share was 24% 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.

The Consumer Discretionary sector, by definition, is made up of companies selling non-essential goods and services. When economic conditions deteriorate or tastes shift, consumers can easily cut back or eliminate these purchases. For long-term investors with five-year holding periods, this creates a structural challenge: the sector is inherently hit-driven, with low switching costs and fickle customers. As a result, only a handful of companies can reliably grow demand and compound earnings over long periods, which is why our bar is high and High Quality ratings are rare.

Travel and vacation providers operate tour packages, cruise lines, online travel agencies, and vacation rental platforms, connecting consumers with leisure and business travel experiences. Tailwinds include robust post-pandemic travel demand, a consumer preference shift toward experiences over goods, and technology-enabled personalization improving conversion and loyalty. However, headwinds are significant: the industry is acutely sensitive to macroeconomic cycles, geopolitical instability, and fuel price volatility. Low switching costs mean fierce price competition, while capacity additions in segments like cruises can lead to oversupply. Regulatory burdens, weather disruptions, and public health risks further create episodic but potentially severe demand shocks.

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).

Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years. Over the last five years, Hilton Grand Vacations grew its sales at a 38.8% compounded annual growth rate. Though this growth is acceptable on an absolute basis, we need to see more than just topline growth for the consumer discretionary sector, which can display significant earnings volatility. This means our bar for the sector is particularly high, reflecting the non-essential and hit-driven nature of the products and services offered. Additionally, five-year CAGR starts around Covid, when revenue was depressed then rebounded.

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 as its annualized revenue growth of 12.6% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

Hilton Grand Vacations also discloses its number of members and conducted tours, which clocked in at 722,874 and 224,894 in the latest quarter. Over the last two years, Hilton Grand Vacations’s members averaged 7.6% year-on-year growth while its conducted tours averaged 2.6% year-on-year growth.

This quarter, Hilton Grand Vacations’s revenue grew by 3.8% year on year to $1.33 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 10.2% over the next 12 months, a slight deceleration versus the last two years. This projection is underwhelming and implies its products and services will face some demand challenges.

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

Hilton Grand Vacations’s operating margin might fluctuated slightly over the last 12 months but has generally stayed the same, averaging 8.8% over the last two years. This profitability was inadequate for a consumer discretionary business and caused by its suboptimal cost structure.

This quarter, Hilton Grand Vacations generated an operating margin profit margin of 9.5%, in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Hilton Grand Vacations’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q4, Hilton Grand Vacations reported adjusted EPS of $0.88, up from $0.49 in the same quarter last year. Despite growing year on 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 $2.11 to grow 106%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

Hilton Grand Vacations has shown poor cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 13%, lousy for a consumer discretionary business.

Hilton Grand Vacations’s free cash flow clocked in at $125 million in Q4, equivalent to a 9.4% margin. The company’s cash profitability regressed as it was 59.4 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.

Over the next year, analysts’ consensus estimates show they’re expecting Hilton Grand Vacations’s free cash flow margin of 9.3% for the last 12 months to remain the same.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared 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 5.7%, somewhat low compared to the best consumer discretionary companies that consistently pump out 25%+.

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. Unfortunately, Hilton Grand Vacations’s ROIC has decreased over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

Debt is a tool that can boost company returns but presents risks if used irresponsibly. As long-term investors, we aim to avoid companies taking excessive advantage of this instrument because it could lead to insolvency.

Hilton Grand Vacations’s $7.35 billion of debt exceeds the $571 million of cash on its balance sheet. Furthermore, its 7× net-debt-to-EBITDA ratio (based on its EBITDA of $950 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 EPS missed and its revenue fell short of Wall Street’s estimates. Overall, this was a softer quarter. Still, the stock traded up 1.6% to $49.40 immediately after reporting.

Updated: February 26, 2026 at 7:28 AM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Hilton Grand Vacations.

We cheer for all companies serving everyday consumers, but in the case of Hilton Grand Vacations, we’ll be cheering from the sidelines. While its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its number of members has disappointed. On top of that, its Forecasted free cash flow margin for next year suggests the company will fail to improve its cash conversion.

Hilton Grand Vacations’s P/E ratio based on the next 12 months is 11.2x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $52 on the company (compared to the current share price of $49.40).