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Beverages – Soft Drinks Industry Module 3: Market Multiple Valuation

Beverages – Soft Drinks Industry Module 3: Market Multiple Valuation. Megan Morava. Background. World’s largest beverage company License and market 500 nonalcoholic beverage brands Primarily sparkling beverages Coca-Cola, Diet Coke, Fanta , Sprite

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Beverages – Soft Drinks Industry Module 3: Market Multiple Valuation

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  1. Beverages – Soft Drinks Industry Module 3: Market Multiple Valuation Megan Morava

  2. Background • World’s largest beverage company • License and market 500 nonalcoholic beverage brands • Primarily sparkling beverages • Coca-Cola, Diet Coke, Fanta, Sprite • Strong brand loyalty and diversified geographical operations offer competitive advantage • Revenues 2012: $48 billion, 3.17% increase

  3. Performance Measure Selection • EPAT • Sales • Gross Profit • Advertising Expense • Industry based multiple

  4. Comparable Companies • Pepsi Co. • Dr. Pepper – Snapple • Monster Beverage

  5. Data Used for Valuation

  6. Valuation using EPAT Multiple Hold

  7. Valuation using Sales Multiple Hold

  8. Valuation using Gross Profit Multiple Hold

  9. Valuation using Advertising Multiple Sell

  10. Eliminating Monster from the Valuation EPAT Sales Advertising Gross Profit

  11. Combining Estimates of Equity Value per Share Hold/Sell Sell

  12. Conclusion • Using Pepsi, Dr. Pepper-Snapple, and Monster • Stock slightly overvalued • Hold/Sell • Elimination of Monster causes substantial change in estimated value • Stock overvalued by larger amount • Sell • Aside from Pepsi, lack of comparable companies due to size differences

  13. Questions?

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