Question
Data for two hypothetical companies in the pharmaceutical industry, DriveMed and MAT Technology, are given in the table below. For both companies, expenditures in fixed
Data for two hypothetical companies in the pharmaceutical industry, DriveMed and MAT Technology, are given in the table below. For both companies, expenditures in fixed capital and working capital during the previous year reflected anticipated average expenditures over the foreseeable horizon. DriveMed MAT Tech. Current price $46.00 $78.00 Trailing CF per share $3.60 $6.00 P/CF 12.8 13.0 Trailing FCFE per share $1.00 $5.00 P/FCFE 46.0 15.6 Consensus five-year growth forecast 15% 20% Beta 1.25 1.25 On the basis of the information supplied, discuss the valuation of MAT Technology relative to DriveMed. Justify your conclusion.
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