Question
Cool Shoes (CS) had 2015 sales of $518 million. You expect sales to grow at 9% next year (2015), but decline by 1% per year
Cool Shoes (CS) had 2015 sales of $518 million. You expect sales to grow at 9% next year (2015), but decline by 1% per year after until you settle to a long-run growth rate of 4%. You expect EBIT to be 9% of sales, increases in net working capital requirements to be 10% of any increase in sales (hint: just the increase from the prior year), and net investment to be 8% of any increase in sales. (Note: this is in excess of depreciation).
Other 2015 data for Cool Shoes:
EPS= $1.65
Book value of equity= $12.05 per share
EBITDA= $55.6 million
Excess Cash= $100 million
Debt= $3 million
Shares outstanding= $21 million
Income tax is 30% of EBIT
WACC=10%
a.) Using the DCF method, determine the enterprise value of CS. (Hint: Don't forget the terminal value.)
b.) Using the answer from part a.) what is the price per share?
c.) Using the information from the comparable stock prices and multiples table, estimate the price per share using the average P/E multiple.
d.) Using the information from the comparable stock prices and multiples table, estimate the price per share using the average Enterprise Value to sales multiple.
e.) Using the information from the comparable stock prices and multiples table, estimate the price per share using the average Enterprise Value to EBITDA multiple.
f.) What range of prices do you estimate based on your analysis in Reqs b-e? Summarize the Low, High, and Average.
Comparable stock prices and mutliples for the Footwear Industry, 2015
Ticker | Name | Stock Price ($) | Market Capitalization ($ millions) | Enterprise Value ($millions) | P/E | Price/Book | Enterprise Value/Sales | Enterprise Value/EBITDA |
KCP | Kenneth Cole Productions | 26.75 | 562 | 465 | 16.21 | 2.22 | 0.9 | 8.36 |
NKE | NIKE, Inc | 84.2 | 21,830 | 20,518 | 16.64 | 3.59 | 1.43 | 8.75 |
PMMAY | Puma AG | 312.05 | 5,088 | 4,593 | 14.99 | 5.02 | 2.19 | 9.02 |
RBK | Reebok International | 58.72 | 3,514 | 3,451 | 14.91 | 2.41 | 0.9 | 8.58 |
WWW | Wolverine World Wide | 22.1 | 1,257 | 1,253 | 17.42 | 2.71 | 1.2 | 9.53 |
BWS | Brown Shoe Company | 43.36 | 800 | 1,019 | 22.62 | 1.91 | 0.47 | 9.09 |
SKX | Sketchers USA | 17.09 | 683 | 614 | 17.63 | 2.02 | 0.62 | 6.88 |
SRR | Stride Rite Corp. | 13.7 | 497 | 524 | 20.72 | 1.87 | 0.89 | 9.28 |
DECK | Deckers Outdoor Corp. | 30.05 | 373 | 367 | 13.32 | 2.29 | 1.48 | 7.44 |
WEYS | Weyco Group | 19.9 | 230 | 226 | 11.97 | 1.75 | 1.06 | 6.66 |
RCKY | Rocky Shoes & Boots | 19.96 | 106 | 232 | 8.66 | 1.12 | 0.92 | 7.55 |
DFZ | R.G. Barry Corp | 6.83 | 68 | 92 | 9.2 | 8.11 | 0.87 | 10.75 |
BOOT | LaCrosses Footwear | 10.4 | 62 | 75 | 12.09 | 1.28 | 0.76 | 8.3 |
Average Lead (excel, KCP) | 15.01 | 2.84 | 1.06 | 8.49 | ||||
Max (relative to Ave.) | 51% | 186% | 106% | 27% | ||||
Min (relative to Ave.) | 42% | 61% | 56% | 22% |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started