1 / 9

VALUATION OF EQUITY

VALUATION OF EQUITY. Discount, Variety Store - Costco Aileen Huang. Costco. Established in 1983 71,200 members 451 Warehouses/stores in U.S. Sales: $103m; Net income: $2m Competitors: Sam’s Club, BJ Wholesale Started same time, only three big wholesale clubs still in operation

jock
Download Presentation

VALUATION OF EQUITY

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. VALUATION OF EQUITY Discount, Variety Store - Costco Aileen Huang

  2. Costco • Established in 1983 • 71,200 members • 451 Warehouses/stores in U.S. • Sales: $103m; Net income: $2m • Competitors: Sam’s Club, BJ Wholesale • Started same time, only three big wholesale clubs still in operation • Market share 67% Sam’s Club; 17% Costco

  3. Assumption • WACC 8% • Growth rate • 2014-2018 5.6% • Perpetual growth rate 4.00% • EPM from sales 2.20% • EATO 10.2

  4. Analysts’ Forecast

  5. Perpetual growth rate? • Growth rate=5.25% • Feel like too high for Costco • Adjust to 4%

  6. Residual income model • Perpetual growth rate: 4% • Share price: $81.88, lower than actual price $114.93

  7. Sensitivity Analysis • Overvalued

  8. DCF Model • Adjusting date: $56,351 (53,967*1.08 205/365) • Adjusting mid-year: $58,605 (56,351*1.04)

  9. Sensitivity Analysis • Market cap $50,070 • NFL $732 • Enterprise value $50,802 • Undervalued

More Related