1 / 19

Module 9: Valuation of equity Company: chipotle

Module 9: Valuation of equity Company: chipotle. Matt Ramirez. Chipotle background. Mexican grill that focuses on serving quality food while maintaining speed and efficiency Found in 1993 by Steve Ells in Denver, Colorado

jess
Download Presentation

Module 9: Valuation of equity Company: chipotle

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. Module 9: Valuation of equityCompany: chipotle Matt Ramirez

  2. Chipotle background • Mexican grill that focuses on serving quality food while maintaining speed and efficiency • Found in 1993 by Steve Ells in Denver, Colorado • Considered a “fast-casual” restaurant: food that is served fast without the “fast food” methods or ambiance, allows customers to eat “on the go” or in a nicer restaurant environment • Not franchised, centrally-owned

  3. Value of equity (own estimate)

  4. Estimate of market value of debt

  5. Estimate of enterprise value

  6. Estimate of equity value

  7. discussion • Confident that my Net Financial Assets reflects accurate market value: no footnotes indicating difference or adjustments for 2013 • Net Financial Assetsadded to calculated enterprise value to find equity value (no liabilities/no debt) • Possible adjustments to NFA later on as footnotes are analyzed further • Difficult to predict cost of equity: not constant due to its dependence on leverage (also not constant): better to focus on enterprise valuation (less expectation to change)

  8. Sensitivity matrix

  9. Sensitivity to long-term growth rate & wacc

  10. discussion • The sensitivity matrix shows possible differences to the market: does the market place a higher long-term growth rate on Chipotle? Are they using a slightly lower WACC? Combination of both? • Is the market overly-optimistic or am I too conservative? • Interesting to see how quickly value grows as growth rate increases by .5-1% and WACC even slightly decreases: possible adjustments needed

  11. Value of equity (using analyst estimates)

  12. Valueline forecasts of eps/dps

  13. Implied valueline forecasts through 2019 *Implied rate: fourth root of difference from 2014-2018

  14. Estimate of equity value (residual earnings model)

  15. Long-term growth rate derived from rei equation *Calculated by substituting current market price into REI equation and solving for growth *(CIt+1 – rEq x CSEt/CIt – rEq x CSEt-1)=1+g

  16. discussion • Valueline chosen: trusted site and one of few that extended expected EPS through 5 years • No dividends: dividend discount model not used • Residual earnings model seems to be growing year-after-year: when will steady state be achieved? • >10% long term growth rate: does not seem realistic or acceptable to use

  17. conclusion

  18. Estimate price comparisons

  19. Final comments • Market places much higher value than my own/analyst current estimates: where is this extra value? • Leverage is almost impossible to predict, making estimates/assumptions for equity is extremely difficult: should therefore make valuations based on the enterprise • Most likely need to refine my models: possible long-term growth rate increase 4.5% to better reflect the market

More Related