Question

In 2017, a relevant benchmark for FIN corporation is found to have the following values.

P/E = 8.1

P/S = 0.75

P/B = 2.5

P/OCF = 6.0

Calculate the estimated price for FIN corp using the valuation by comparables.

(FIN corp Balance Sheet)

	2016	2017
Cash	499	626
Receivables	3831	4141
Inventories	4449	4809
Other current assets	869	869
Total current assets	9648	10445
Property plant and equipment PPE	18442	21861
accumulated depreciation	4909	6172
Net property, plant and equipment	13533	15689
Other concurrent assets	973	973
Total assets	24154	27107
Accounts payable	4160	4496
Current portion of long term debt	905	892
Accrued expenses	1566	1693
Income taxes payable	423	424
Total current liabilities	7054	7505
Defferred income taxes and other liabilities	1152	1152
Long term Debt	8088	9396
Total Liabilities	16294	18053
Preferred stock	0	0
Common Stock	75	75

Capital surplus.	1098	1118
Retained Earnings.	6687	7861
Shareholders equity	7860	9054
Total liabilities and net worth	24154	27107

(Fin corp Income statement.)

2017

Net Sales	43115
Cost of goods sold	29450
Gross profit	13665
Selling, general, and other administrative expenses	9602
Depreciation and amortization expense	1263
interest expense	578
Income before taxes	2222
Income taxes expense	844
Net income	1378
Outstanding shares	905
share price	$25

Answer 1

Using

1)

P/E = 8.1

EPS for FIN = Net Income/ Total shares o/s = 1378/905 = 1.52

Price =8.1 * 1.52 = $ 12.33

2)

P/S = 0.75

Sales for FIN = 43115

Sales/share = 43115/905 = $ 47.64

Price = 0.75 * 47.64 = $ 35.73

3)

P/B = 2.5 times

BV per share = (Total Assets -Liabilities)/ Number of shares = (27107 - 18053)/905 = 10.004

Price = 2.5 * 10.004 =$ 25.01