Market Multiples Homework If you are comfortable with the lecture and supporting materials on market multiples, this assignment can be completed in an hour or less. If not, this assignment will serve as valuable preparation and evidence of being ready for the upcoming exam. Note there is an optional question for extra credit if you choose to answer it. Use a P/E based market multiples approach to estimate what the market price per share should be as of 12/31/2015. Limit the data used to what is provided below. Express Scripts was exclusively a mail order pharmacy. The other three companies all have physical store locations with some mail order support, which was mostly contracted out to a mail order supplier. Reminder: net income is the same as earnings. Company Names ----> All $ in millions except per share data CVS Health Corporation Rite Aid Corp. Revenues Gross Margin Net Income EBITDA Total Assets Cotal Liabi Market Cap (total market price of all shares) $153,290 17.31% $5,237 $10,954 $93,657 $56,461 $112,562 Walgreens Express Boots Scripts Alliance Holding Inc Co $103,444 $101,752 26.03% 8.26% $4,220 $2,476 $6,901 $4,968 $68,782 $53,243 $37,921 $35,871 $89,558 $45,888 $26,528 28.56% $2,109 $1,123 $8,863 $8,806 $8,518 Number of shares outstanding as of 12/31/2015 (millions) Market price per share as of 12/31/2015 (rounded) 1,110 1,090 $82 665 $69 1,065 $8 Return on Sales Asset Turnover Financial Leverage Return on Equity 4.1% 2.0 2.2 18.2% 2.4% 8.0% 1.9 3.4 3.1 155.3 14.2% 4199.3% 1. Identify the benchmark company or companies for CVS you will use to value CVS. (briefly explain your choice). 2. Use a P/E based market multiples approach to value CVS in terms of market price per share (show your calculations). 3. Briefly (no more than one or two paragraphs) your valuation and its accuracy. 1. Choose a multiple other than P/E and estimate CVS's market value per share. Then discuss the reasons for the difference between this value and the value from your answer to question 2 above