Why the Value of the Company Differs Across Different Valuation Models?


SKU: Repo029000 Category:

Company Analysis

Competitor Analysis


How to improve student engagement?

Cooperation and mutual respect amongst members

-An Expectation Exercise
•What do you think you are expected to contribute to this team?
•What do you think other team members do not understand about your role?
•What type of help do you need from other team members in order to carry
out your roles successfully?


Executive Summary

  • Company overview
  • Historical performance reflects companies earnings
  • Yahoo finance/Bloomberg/Company website/IBIS world/Google Finance
  • Brief summary of the results and decision




Part 1

Evaluate the company’s recent and overtime financial performance and compare these performances with its peer’s performances using DuPont

1. Recent financial performance

– choose a time frame (after the GFC or major public announcements)

2. Overtime financial performance

– choose a time frame (before and after GFC)

3. Peer comparison (Discuss few major competitors performance compare to SHL and use only one company for all the calculations along with SHL)

4. DuPont Analysis

– 3 steps: Profit Margin, Total Asset Turnover and Financial Leverage

– 5 steps: In addition, Interest Expense rate and Tax Retention Ratio


Part 1 (cont.)

Analyse the company’s/industries current issues and estimate the impact of these issues on the company’s future earnings

1. At Macro Level

– general factors that apply for the industry (income, growth the industry, govt. regulation etc.)

2. At Micro Level
– the company specific requirements (operation, level of debt, directions/goals, competition etc.)


Estimate the value of the company


1. Dividend Valuation Model (DDM)

– Estimate the company’s beta using CAPM

RFR = 10 years Australian Govt. bond rate

Market Premium = Index Return – RFR

– Estimate the growth rate (short term or long term)

– Forecast dividends (if applicable)

– Assumptions


2. Free Cash flow to Equity (FCFE)

– Estimate FCFE

– Growth rate of FCFE


3. Price/Earnings Ratio Model

-obtain past price/calculate current/future price

-estimate expected earnings

-any assumptions?


4. Price/Book Ratio Model

-obtain past P/BV

-obtain/estimate current/future BV

-any assumptions?


Evaluation of the value/price of the company

Why the value of the company differs from the current/recent share price?

Why the value of the company differs across different valuation models?

 Which model is the most appropriate and why?


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