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Module 3: Market Multiples

Module 3: Market Multiples

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Module 3: Market Multiples

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  1. Module 3: Market Multiples The Ford Motor Company By: Paula Casini

  2. Ford Motor Company • Automotive Sector – sale of vehicles, service parts and accessories • Ford North America • Ford South America • Ford Europe • Ford Asia Pacific Africa • Financial Services Sector • Ford Motor Credit Company – vehicle related financing, leasing and insurance • Other Financial Services – holding companies and real estate

  3. Auto Manufacturers – Major Industry • Ford • General Motors • Toyota • Honda

  4. Comparable Company Data • Book value of equity • Common shares outstanding • Equity Value = closing price per share * common shares outstanding • Enterprise Value = equity value + NFL

  5. Valuation using an NEA Multiple

  6. Valuation using an NEA Multiple: Domestic Companies Only

  7. Buy/Hold/Sell Recommendation • Ford Stock Price = $15.83 • Equity Value (all comparables) = $26.76 • Buy • Equity Value (domestic only) = $32.09 • Buy

  8. Valuation using an EPAT Multiple

  9. Valuation using an EPAT Multiple:Domestic Companies Only

  10. Buy/Hold/Sell Recommendation • Ford Stock Price = $15.83 • Equity Value (all comparables) = $(10.43) • Sell • Equity Value (domestic only) = $(11.29) • Sell

  11. Valuation using an R&D Multiple

  12. Valuation using an R&D Multiple: Domestic Companies Only

  13. Buy/Hold/Sell Recommendation • Ford Stock Price = $15.83 • Equity Value (all comparables) = $22.60 • Buy • Equity Value (domestic only) = $9.08 • Sell

  14. Valuation using an Advertising Multiple

  15. Valuation using an Advertising Multiple: Domestic Companies Only

  16. Buy/Hold/Sell Recommendation • Ford Stock Price = $15.83 • Equity Value (all comparables) = $35.33 • Buy • Equity Value (domestic only) = $9.07 • Sell

  17. Combining Estimates of Equity Value per Share

  18. Buy/Hold/Sell Recommendation • Ford Stock Price = $15.83 • Equity Value (all comparables) = $18.59 • Buy • Equity Value (domestic only) = $9.47 • Sell

  19. Weaknesses of the Market Multiples Valuation Method • No single measure is appropriate • Assume the comparable companies are correctly valued • How do we combine the comparable company data to produce a multiple? • Comparing US and foreign companies • Large differences in Equity Values between the multiples