What are the estimated share prices for all four companies in Q3-5? A table summarizing your findings is useful. 

The summary table here demonstrates our collective share prices for all four companies. These were collated from our individual share prices gathered for the Individual component (also above). While for Tesla company as well as PACCAR and Shyft Group we all had the same values, the remainder differed between each member. This is with the exception of share prices for PACCAR and Shyft Group where Isabel and Harisa had the same values and Max's differed. Reasons for this could include the values that we all obtained from the website to make these calculations, as well as the formulas used to configure these share prices values. These differences will be explored in the remaining questions. 

 

 

QUESTION 2: For each of the valuations, what assumptions were made, how realistic are they, and how do they compare to the actual share prices?

 

- For the valuation (Share price using 2022 dividend model), our assumptions included

·       Growth rate for DDM continues indefinitely and constantly

·       The question told us to assume that if the growth rate calculated for this question is negative, assume it is 0

·       The question also told us that if the average growth rate is greater than the discount rate, to use a revised growth rate that is equal to the discount rate minus 1%

 

For this question, all members of the group had different values, with the exception of Tesla,. However Tesla did not have dividend data, and therefore their share price for this question was 0. Therefore, assumptions for this question must have impacted our results and calculations relatively considerably because of the varied values we all calculated. This could be because maybe not all members remembered to follow the assumptions given by the question, and therefore we would have all had different growth and discount rates. This was evident in members excel documents and after discussing this with the group it was mentioned that some members forgot this information. Furthermore, using the discount dividend model brings about its own challenges; for instance this model assumes the dividend value used is constant - this is not the case, and dividend values constantly change. Likewise it assumes a consistent growth rate, which is also not realistic and this value is very liquid. 

 

For the valuation (Share price using dividend forecast), our assumptions included;

·       Valuation based on expected future dividends (forecasts)

·       The question asked us to assume a dividend payout ratio of 30% to forecast the dividend. 

 

Because most group members found different values off the website for EPS values in Question 1, this impacted the rest of our valuations and can explain the differences between our values. In this question specifically where the dividend forecast was used to estimate the share prices, potential areas where group members resulted in different valuations would be due to members obtaining different dividend information for the companies at hand. In Question 2 we were asked to investigate historical dividends however all group members seemed to have found different values. Similarly, estimating share prices based on future dividends brings about its own assumptions because these are just simply forecasts and while these are usually based on sound financial advice, this is really a guess and there's lots of factors that could affect these results; e.g. unexpected economical conditions. 

 

 

For the valuation (Share price using PE Benchmarking), our assumptions included;

·       Share prices of target company compared to share prices from their sector/department

 

With the exception of Honda and Tesla, group members found Benchmark PE values varied quite substantially. Again, this caused variations in our final share prices and ending values were quite different. These are due to the values that each group member found for the relative sectors of the Business. This is likely due to there being multiple sectors that e.g. Tesla was included under, however it needed to be specifically Tesla (TSLA). Finding another sector would have reflected a different Benchmark PE value, causing variation in group member responses to these calculations. For calculating share prices using PE benchmarking, there are other assumptions; the companies that were being compared to their sector values may not be as comparable as desired, nor as comparable as other companies. And even if the companies are relatively comparable, there may still be larger variation in factors such as growth prospects which is overall going to affect the impact of share price estimates.

 

 

QUESTION 3: Some actual share prices have been much higher or lower than your valuation. Pick the stock that has the largest difference and explain what you think might be the reason for such a difference? List three reasons and explain.

 

- Across all group members excel worksheets, PACCAR exists as a clear anomaly. Being the largest proportionality whilst estimating the share prices using the 2022 dividend,share prices using dividend forecast and finally share prices using PE benchmarking. Yet because of this information, it may be sensible to assume that the dividend models used are not the most effective way to calculate company valuation, especially with large fluctuations of dividend growth rates. These erratic changes can greatly skew the data giving potentially inaccurate conclusions. During 2022, PACCAR paid out a record dividend of $4.19. Over four times that of any other stock being compared. Ultimately providing an explanation to the dramatic figure calculated. Another implication potentially influencing this large valuation is the integrity of the industry forward P/E ratio data used. Due to the data being last updated in January 2023, there is ample opportunity for the benchmark P/E to no longer display accurate and updated figures. Again, potentially providing further reason for the large valuation present in several questions. 

 

QUESTION 4: What are some advantages or disadvantages each of the companies has in this changing industry? Which of the companies do you think is best positioned to address the challenges, and why?