VAC

We rate MARRIOTT VACATIONS WORLDWIDE Corp (VAC) as a Reduce with a composite score of 42.6/100 at a current price of $56.20. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in quality (58th percentile) and value (42th percentile), which together account for the majority of the composite score. Offsetting weakness in stability (18th percentile) and momentum (23th percentile) tempers our overall conviction. We assign a No Moat rating (30/100), Very High uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

MARRIOTT VACATIONS WORLDWIDE Corp holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 42.6/100 places it at rank #3165 in our full 7,333-stock universe. At $2.3B in market capitalization, MARRIOTT VACATIONS WORLDWIDE Corp is a mid-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 11%, though momentum at the 23th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 76% (-0.5pp vs sector) narrow to operating margins of 8% (-8.6pp vs sector) and net margins of 4.1%, yielding a gross-to-net conversion rate of 5%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $56.20, MARRIOTT VACATIONS WORLDWIDE Corp is trading near fair value based on current fundamentals. Our value factor score of 42/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 9.8x (roughly in line with the sector median of 11.9x), EV/EBITDA of 3.6x (discounted to peers), P/B of 0.8x, P/S of 0.4x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Very High uncertainty rating to MARRIOTT VACATIONS WORLDWIDE Corp. The stock exhibits multiple compounding risk factors: elevated market sensitivity (beta of 1.72), significant leverage (312% debt-to-equity), below-average price stability (18th percentile). The extreme uncertainty around future cash flows makes precise valuation difficult, and the range of outcomes is exceptionally wide. Only investors with high risk tolerance and extended time horizons should consider this name.

Specific risk factors that inform our assessment include: elevated market sensitivity (beta of 1.72); significant leverage (312% debt-to-equity); below-average price stability (18th percentile); the combination of leverage (312% D/E) and thin margins (4.1% net) amplifies downside risk. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 18th percentile and quality factor at the 58th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 76% provide a buffer against cost pressures; a 4.75% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate MARRIOTT VACATIONS WORLDWIDE Corp's capital allocation as Poor. Key concerns include elevated leverage (312% D/E). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — MARRIOTT VACATIONS WORLDWIDE Corp significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, MARRIOTT VACATIONS WORLDWIDE Corp receives a Reduce rating with a composite score of 42.6/100 (rank #3165 of 7,333). Our quantitative framework assigns a No Moat (30/100, trend: stable), Very High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 36/100.

Our analysis does not support a constructive view on MARRIOTT VACATIONS WORLDWIDE Corp at this time. The combination of limited competitive advantages, very high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.