MARKET MULTIPLE VALUATION

1. MARKET MULTIPLE VALUATION Vernon Gair

3. About the Company • Aéropostale, Inc. is a primarily mall-based, specialty retailer of casual apparel and accessories, principally targeting 14 to 17 year-old young women and men through its Aéropostale stores and 4 to 12 year-old kids through its P.S. from Aéropostale stores.

4. Market Multiple Valuation • Market Multiple Valuation is a quick and simple way to value a company relative to comparable firms • This is often used as a “first-pass” indicator of value • If markets are truly efficient, then, comparable companies can be a reasonable proxy for value • Truly comparable companies can be hard to find • Multiple can be distorted by stock market psychology and momentum being “priced-in”

5. Measures of Performance

6. Net Enterprise Asset Multiple

7. Book Value Multiple

8. EPAT Multiple

9. Net Income Multiple

10. Comprehensive Income Multiple

11. Selling Sq. Ft. Multiple

12. Summary

13. Implied Price Per Share

14. Recommendation • As of the Balance Sheet Date, ARO was overvalued 13.7% at 13.50 compared to its implied value of 11.64. • Using the metrics from the balance sheet date is optimistic as TTM information is worse than FY12 • The comparable firms chosen offer targets as ARO underperforms the average on most metrics • ARO: Sell

15. 1 Yr. Stock Chart

16. Analysis • Balance Sheet Multiples suggested higher implied equity values than Income Statement Multipes • Driven by low ROA • Multiples suggest ARO was overvalued as of the Balance Sheet date of 2/2/2013 at $13.50, with a target price of $11.64 but current market price is at $7.26 • Metrics used are almost a year old • Current ARO Multiples even harder to come by with projected loss in FY2013 • Circularity in Market Efficiency Argument