1 / 17

Hibbett Sports, Inc.

“Game Tested. Athlete Approved.”. Hibbett Sports, Inc. Kevin A. Pribil. Module 3. Company Overview Intro to Market Multiples Step 1: Selecting Performance Measures Step 2: Selecting Comparable Co’s Step 3: Computation NEA EPAT Net Income Sales Step 4: Valuing Hibbett Sports, Inc.

april-talley
Download Presentation

Hibbett Sports, Inc.

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. “Game Tested. Athlete Approved.” Hibbett Sports, Inc. Kevin A. Pribil Module 3

  2. Company Overview • Intro to Market Multiples • Step 1: Selecting Performance Measures • Step 2: Selecting Comparable Co’s • Step 3: Computation • NEA • EPAT • Net Income • Sales • Step 4: Valuing Hibbett Sports, Inc. • Step 5: Per Share Valuation • Closing Thoughts on Market Multiple Analysis Agenda

  3. Est. 1945 as Dixie Supply Co. in Alabama • Began in the marine and small aircraft markets but moved into sporting goods by the ‘60s • IPO in October 1996; operated 79 stores at the time • Incorporated in Delaware in 2007 • Immense growth into a now 873 store company • CEO- Jeffry Rosenthal, 55, former executive at Champs • Chairman- Michael Newsome, 74, began at Hibbett over 45 years ago and worked his way up from cashier Company Overview

  4. As a retailer Hibbettoperates typically in 5,000 sq. ft. stores usually influenced by the location of a WalMart • 4 different types of stores • Hibbett Sports: full retail format • Sports Additions: 90% footwear and headgear • Sports & Co.: a 25,000 sq. ft. superstore (1 in operation) • Team: leading customized apparel supplier • CEO and CFO conduct annual evaluation of efficiency of internal controls procedures based on COSO standards • KPMG released audit report on Hibbett’s internal controls Company Operations

  5. Increased competition not only between sporting goods stores but also with departments stores and online merchandisers • Increased store overhead (ex: rock-climbing walls, putting greens) • The fight for exclusive contracts with vendors • Analysts expect a slight decline in revenue of .1% per year through 2018. Industry Drivers Source: www.ibisworld.com

  6. Referred to as the “method of comparables” • Typically an initial valuation method / screening method • Some prefer it because it does not rely on unknown future forecasts, which are largely subjective • 5-step Processto determine Buy, Sell, Hold decision Intro to Market Multiples

  7. No single measure determines current performance, so a look at several figures will provide a more well-rounded look • NEA & EPAT used for Hibbettand its comparable companies • Net Income & Sales used for Hibbett and comparables plus a non-analyzed comparable Step 1: Selecting Performance Measures

  8. Hibbett most comparable to Footlocker & Cabela’s as primary sporting goods stores • Highly comparable due to the nature of enterprise operations • Walmartnot comparable because only 8% of operations is related to sporting goods sector • Additional analysis including Finish Line to provide a better-averaged market multiple Step 2: Selecting Comparable Companies

  9. Valuation excluded Walmart because of the extreme differences in enterprise operations. Step 3: Computation - NEA

  10. Valuation excluded Walmart because of the extreme differences in enterprise operations. Step 3: Computation - EPAT

  11. Valuation excluded Walmart because of the extreme differences in enterprise operations. It did, however, include Finish Line to make the average of net income multiples more realistic. Step 3: Computation – Net Income

  12. Valuation excluded Walmart because of the extreme differences in enterprise operations. It did, however, include Finish Line to make the average of sales multiples more realistic. The requirement of having NFL presented a challenge in calculating the sales multiple analysis Due to Hibbett’s aggregated and simplistic F/S and the fact Hibbett & comparables are retailers, the industrymultiple that seemed fitting was sales… Step 3: Computation – Sales

  13. Company valuation was as follows • NEA  $582,239,080 • EPAT  $1,222,340,614 • Net Income  $1,464,170,792 • Sales  $1,410,335,843 • Overall Valuation Average = $1,169,771,582 Step 4: Valuing the Co.

  14. Looking at Equity Value enables a comparison to actual trading prices • Next step is to divide by # of shares outstanding to determine per share accuracy Step 4: Valuing the Co.

  15. Per Share valuation was as follows • NEA  $15.38 • EPAT  $32.30 • Net Income  $38.69 • Sales  $37.26 • Overall Valuation Average = $30.91 Step 5: Value Per Share

  16. Hibbett’s stock price closed at $59.94 on January 24th. • With per share valuations ranging from $15.38 to $38.69 the multiples analysis implies that the HIBB is overvalued by an average of ~$30. • Under the assumption that this valuation technique is accurate and theoretically sound; investors would SELL this stock. • This is because according to the efficient-market hypothesis, HIBB current trading price will decline to reflect its true value. Step 5: Value Per Share

  17. Although easy to use, this method is not theoretically sound. • As a result of its underlying issues, the multiples analysis is avoided for favor of true valuation models focusing more on financial forecasting Closing Thoughts

More Related