Delta airlines module 3 market multiple valuation
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Delta Airlines Module 3: Market Multiple Valuation. Laura Conti. Comparable Companies. Delta Airlines Southwest Spirit JetBlue Question: Are comparable companies properly priced?

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Delta Airlines Module 3: Market Multiple Valuation

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Delta AirlinesModule 3: Market Multiple Valuation

Laura Conti


Comparable Companies

  • Delta Airlines

    • Southwest

    • Spirit

    • JetBlue

    • Question: Are comparable companies properly priced?

      • Assuming target company (Delta) is not priced correctly but other companies similar to Delta are priced properly


NEA Multiple


NEA Multiple

  • Enterprise value = NEA * NEA market multiple

  • $52,423.83 = $8,017 * 6.54

  • Equity value = Enterprise value – value owed to debt holders (NFL)

  • $42,275.83 = $52,423.83 - $10,148

  • Equity value per share= Equity value/common shares outstanding

  • $48.71 = $42,275.83/867.87 shares

  • Market share as of 1/24/2014: $31.11 -undervalued

  • Recommendation: Buy


Book Value Multiple


Book Value Multiple

  • Equity value = Book value of equity * BV market multiple

  • -$2,131 = -$2,131 * 1

  • Equity value per share = Equity value/common shares outstanding

  • -$2.46= -$2,131/867.87

  • Market share as of 1/24/2014: $31.11 -overvalued

  • Recommendation: Sell


EPAT Multiple


EPAT Multiple

  • Enterprise value = EPAT * EPAT market multiple

  • $265.27 = $10 *26.53

  • Equity value = Enterprise value – value owed to debt holders (NFL)

  • -$9,882.73 = $265.27- $10,148

  • Equity value per share = Equity value/common shares outstanding

  • -$11.39 = -$9882.73/867.87

  • Market price as of 1/24/2014: $31.11 –overvalued

  • Recommendation: Sell


NI Multiple


NI Multiple

  • Equity value =Net income * NI market multiple

  • $11,738.34 = $1,009 * 11.63

  • Equity value per share = Equity value/common shares outstanding

  • $13.53 = $11,738.34/867.87

  • Market price as of 1/24/2014: $31.11 –overvalued

  • Recommendation: Sell


CI Multiple


CI Multiple

  • Equity value =Comprehensive Income * CI market multiple

  • -$10,130.94 = -$802 * 12.63

  • Equity value per share = Equity value/common shares outstanding

  • -$11.67 = -$10,130.94/867.87

  • Market price as of 1/24/2014: $31.11 –overvalued

  • Recommendation: Sell


Industry Multiple: Available Seat Miles

  • A measure of an airplane's carrying capacity available to generate revenue. Available seat miles refers to how many seat miles are actually available for purchase on an airline. Seat miles are calculated by multiplying the available seats for a given plane by the number of miles that plane will be flying for a given flight.

  • Potentially better estimate because it deals with a relevant industry measure that can help to estimate future performance because it is tied to a value driver


Available Seat Mile Multiple


Available Seat Miles Multiple

  • Enterprise value = Available Seat Miles * Available seat miles market multiple

  • $41,070.60 = 230,415 * 0.18

  • Equity value = Enterprise value – value owed to debt holders (NFL)

  • $30,922.60 = 41,0170.60 – $10,148

  • Equity value per share = Equity value/common shares outstanding

  • $35.63 = $30,922.60/ 867.87

  • Market price as of 1/24/2014: $31.11 –undervalued

  • Recommendation: Hold


Averages

  • Average of all multiples: $12.06

  • Average of multiples (except negative book value): $21.62

  • Market price as of 1/24/2014: $31.11

  • Stock is overvalued

  • Recommendation: Sell


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