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Starbucks Module 2. Adrian Serles. Step One. Select Summary Performance Measures EPAT FCF EBITDA . Step 2. Select Comparable Companies Panera Bread Einstein Noah Chipotle. Step 3. Compute the Market Multiple - EPAT. Step 3. Compute the Market Multiple – FCF. Step 3.
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StarbucksModule 2 Adrian Serles
Step One • Select Summary Performance Measures • EPAT • FCF • EBITDA
Step 2 • Select Comparable Companies • Panera Bread • Einstein Noah • Chipotle
Step 3 • Compute the Market Multiple - EPAT
Step 3 • Compute the Market Multiple – FCF
Step 3 • Compute the Market Multiple – EBITDA
Step 4 • Compute Target Company’s Value Using Multiples - EPAT
Step 4 • Compute Target Company’s Value Using Multiples - FCF
Step 4 • Compute Target Company’s Value Using Multiples - EBITDA
Step 5 • Compute Equity Value per Share - EPAT
Step 5 • Compute Equity Value per Share - FCF
Step 5 • Compute Equity Value per Share - EBITDA
Analysis - EPAT • Buy • The EPAT multiple suggests the shares are undervalue by the market
Analysis - FCF • Buy • The FCF multiple suggests the shares are undervalue by the market
Analysis - EBITDA • Buy • The EBITDA multiple suggests the shares are undervalue by the market
Conclusion • Based solely on the multiples method, Starbucks Corp. Equity seems to be undervalued in the market, suggesting a “buy” decision in all three analyses. • However, the multiples method is NOT the best method to be used in determining whether to “buy, hold or sell.”
Conclusion • Why? • Selecting comparables could be difficult. • Assuming the comparables are fairly valued but, the target company is not. • Value is based on individual earnings measures rather than the company as a whole.