Question 5 - Stock Valuation using Multiples You are trying to value the stock of a small privately held company called Shale Oil Inc. You know that the company has 10 million shares outstanding and that earnings per share are $3.90. You also know that the company has $20 million in outstanding debt, revenues of $150 million, and EBITDA of $60 million. You have compiled the following information on a set of comparable firms that are publicly traded. Selected Data on Comparable Companies Company Name P/E Ratio Enterprise Value Debt to Enterprise Value Ratio Enterprise Value to EBITDA Ratio Enterprise Value to Revenues Ratio 1.83 1.37 2.74 Antero Resources Chesapeake Energy EOG Resources Occidental Petroleum Pioneer Natural Resources Whiting Petroleum $8,001 $13,543 $48,434 $48,556 $22,195 $3,631 0.87 0.72 0.10 0.19 0.07 0.79 1.43 1.44 12.33 8.71 22.99 2.96 4.95 4.44 5.68 5.50 5.67 2.64 2.39 1.96 2.87 A) Calculate the average P/E Ratio, the average Enterprise Value to Revenue Ratio, and the average Enterprise to EBIDTA Ratio of the comparable companies. B) Based on your answers in part (A) provide three estimates of the share price for Shale Oil Inc. (i.e. calculate the share price based on the average P/E, the average EV/Revenue, and the average EV/EBITDA ratios). C) Which of these three multiples would you pick to value the stock of Shale Oil Inc. and why