FE13 - Valuation Multiples Case - TJX Companies Solution PDF

Preview

Summary

FE13 - Valuation Multiples Case - TJX Companies Solution...

Description

FE323 Company Valuation Multiples – TJX Companies Inc. 1. The Following is Selected Financial Data for TJX Companies Inc. (NYSE: TJX) for FY2017 (In Millions). TJX has 646 Million Shares outstanding and the Price per share is $74. Revenue $33,183 Cash & Cash Investments $543 Depreciation 659 Total Assets 12,884 EBIT 3,750 Long Term Debt 2,228 Net Income 2,298 Total Liabilities 8,373 Investment in Net Working Capital 531 Total Shareholders’ Equity 4,511 Capital Expenditures 1,027 Total Liabilities. & SH Equity 12,884 a) What is the Market Capitalization of TJX? b) What is The Enterprise Value of TJX? c) What is the Price/Earnings (P/E) ratio of TJX? d) What is the Enterprise Value/EBITDA Multiple for TJX? e) If Primark Clothing Stores, a company comparable to TJX, has an EBITDA of $675 Million, Net Income of $306 Million, $1 Billion of Net Debt and 85 Million common shares outstanding. Using 2 valuation multiples, what is the range that you might expect one share of Primark to trade at if it were a public company? a) Market Capitalization = Market Value of Equity = Price*Shares outstanding = 74*646 = $47,804 Million b) Enterprise Value = Equity Value + Debt -Cash = 47,804 + 2,228 – 543 = $49,489 Million c) Price/Earnings = Price per Share/Earnings per share = $74 ÷ (2,298÷646) = $74 ÷ ($3.56/share) = 20.8x Alternatively, Price/Earnings = Equity Value/Total Earnings = 47,804÷ 2,298 = 20.8x d) Enterprise Value/EBITDA: EBITDA = EBIT + Depreciation = 3,750 + 659 = $4,409 EV/EBITDA = 49,489 ÷ 4,409 = 11.22x e) FOR PRIMARK, Using EV/EBITDA Multiple = 11.22x: EVPrimark= 11.22*675 = $7,576 Equity Value = EV - Debt + Cash = 7,576 – 1,000 = $6,576 Million Price per Share =$6,576 ÷ 85 = $77.36/share Using P/E Multiple = 20.8x: Equity Value = 20.8*306 = $6,365 Million Price per Share =$6,365 ÷ 85 = $74.88/share We might expect Primark to trade in the range of $74/share to $78/share if it were a public company.

Rev: 10/2019 ©John F Fox

Page |1

BDH Chapter 10 Q4 (Modified) 2. Portage Bay Enterprises has $1Million in Excess cash, no debt, and is expected to have a $6 million Free Cash flow next year. In year 2 it expects its free cash flow will be $10 million and thereafter is then expected to grow at a rate of 3% forever. If Portage Bay’s equity cost of capital is 11% and it has 5 million shares outstanding what is the Price per share of Portage Bay stock?

Find Terminal value = Growing perpetuity = $10 growing at 3% per year forever 





PVTV = PV1=  = .. = . = $125 This is the present value of the Terminal Value AT TIME T=1 Combine Cash Flows at T=1: C1 = $6 + $125 = $131 Total Discounted Cash Flows =

 ()

=

 .

= 118.02

Enterprise Value = V0 = $118.02 = Equity + Debt – Cash Equity Value = Enterprise Value + Cash = 118.02 + 1 = $119.02 Equity Price per share =

.   

= $23.80/Share

$10

$10*(1 + 0.03)

$6 T=0

T=1

Rev: 10/2019 ©John F Fox

T=2

T=3

Page |2...