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Mod 9 Valuation of Equity —Panera

Mod 9 Valuation of Equity —Panera . Yiwen Lin. Agenda. Equity value of the firm U sing analysts forecasts as shortcut to valuation Dividends discount model Residual earnings model Estimating equity value per share Long-term growth rate in earnings/sales

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Mod 9 Valuation of Equity —Panera

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  1. Mod 9 Valuation of Equity —Panera Yiwen Lin

  2. Agenda • Equity value of the firm • Using analysts forecasts as shortcut to valuation • Dividends discount model • Residual earnings model • Estimating equity value per share • Long-term growth rate in earnings/sales • Sensitivity analysis matrix • Adjustments Note: The company issued 2013 10K so the financial statements are updated.

  3. Equity value of the firm

  4. Using analysts forecasts as shortcut to valuation

  5. Dividends discount model • Conclusion: Not applicable to Panera since Panera does not distribute dividends in the past. The company does not have a plan for dividends neither.

  6. Residual earnings model • Conclusion: the growth rate of residual earnings is similar to the cost of equity capital in Module 6, which is 9.10%. It appears that the company has not reached the steady state within the horizon. Thus, we assume a growth rate at 3% for estimation per se (match the estimation made in Mod6, 7, and 8).

  7. Estimating equity value per shareAssume growth rate at 3% • Refer to Module 6,7, and 8, we estimated a growth rate of 3% in the long-term, completely phased-out in 2018. • Reference: Estimated per share equity value = $205.95 • Conclusion: Not reliable way to obtain an indication of value

  8. Long-term growth in earnings/sales • PNRA stock price as of 03/19/2014: $186.68 • In this scenario, we calculated a residual income growth rate of 5.83%. Compared to our estimation of 3%.

  9. Long-term growth in earnings/sales • Expected long-term growth rate in earnings and sales is 17%. This number seems highly inflated.

  10. Sensitivity analysis matrix

  11. Adjustments • Adjusting date of value estimate ($ in thousands) • Panera FYE = 12/31/2013 Valuation date = 03/19/2014 • January 31days • February 28days • March 19days • Total 78days • Mid-year adjustment ($ in thousands)

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