Company Name Delta Air Lines (DAL) American Airlines (AAL) United Continental (UAL) Southwest Airlines (LUV) Alaska Air (ALK) JetBlue Airways (JBLU) Market Capitalization 39,057 15,295 22,648 29,431 7,236 5,008 3,000 1,366 Enterprise Value (EV) SkyWest (SKYW) Hawaiian (HA) Source: Morningstar and Yahoo Finance. April 2019. 47,060 33,745 32,143 29,119 8,103 5,791 5.471 1,575 EV/Sales 1.1x 0.8x 0.8x 1.3x 1.0x 0.8x 1.7x 0.6x EV/EBITDA 6.0x 6.3x 5.8x 6.5x 7.7x 7.3x 6.7x 3.4x EV/EBIT 8.6x 10.5× 9.7x 8.9x 12.3x 19.2x 11.3x 4.8x P/E 10.2x 11.2x 11.0x 12.4x 16.6x 27.7x 11.0x 6.1x P/Book 2.9x 1.3x 2.3x 3.0x 1.9x 1.1x 1.5x 1.4x
Company Name Delta Air Lines (DAL) American Airlines (AAL) United Continental (UAL) Southwest Airlines (LUV) Alaska Air (ALK) JetBlue Airways (JBLU) Market Capitalization 39,057 15,295 22,648 29,431 7,236 5,008 3,000 1,366 Enterprise Value (EV) SkyWest (SKYW) Hawaiian (HA) Source: Morningstar and Yahoo Finance. April 2019. 47,060 33,745 32,143 29,119 8,103 5,791 5.471 1,575 EV/Sales 1.1x 0.8x 0.8x 1.3x 1.0x 0.8x 1.7x 0.6x EV/EBITDA 6.0x 6.3x 5.8x 6.5x 7.7x 7.3x 6.7x 3.4x EV/EBIT 8.6x 10.5× 9.7x 8.9x 12.3x 19.2x 11.3x 4.8x P/E 10.2x 11.2x 11.0x 12.4x 16.6x 27.7x 11.0x 6.1x P/Book 2.9x 1.3x 2.3x 3.0x 1.9x 1.1x 1.5x 1.4x
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Consider the following data for the airline industry for April 2019 (EV = enterprise value, Book = equity book value). Suppose Hawaiian Airlines (HA) has 50 million shares outstanding. Estimate Hawaiian Airlines' share value using each of the five valuation multiples, based on the median valuation multiple of the other seven airlines shown (excluding Hawaiian Airlines).
Calculate Hawaiian Airlines' share values using each of the five valuation multiples below. (Round the median to two decimal places. Round the share price to the nearest cent. Round the EV and market cap to the nearest integer.)
| | EV/Sales | EV/EBITDA | EV/EBIT | P/E | P/Book |
|---------------------|----------|-----------|---------|-----|--------|
| Hawaiian Airlines | 0.60 | 3.4 | 4.8 | 6.1 | 1.4 |
| Median | | | | | |
| Implied EV | $ | $ | $ | | |
| Implied market cap. | $ | $ | $ | | |
| Implied share price | $ | $ | $ | $ | $ |
Explanation:
The table includes five valuation multiples used for estimating the share value of Hawaiian Airlines:
- **EV/Sales:** Enterprise Value to Sales
- **EV/EBITDA:** Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization
- **EV/EBIT:** Enterprise Value to Earnings Before Interest and Taxes
- **P/E:** Price to Earnings
- **P/Book:** Price to Book Value
The values for Hawaiian Airlines are given, and the task is to calculate the estimated share values by using the median of the other seven airlines for each valuation multiple. The medians are to be calculated and used to fill in the implied enterprise value (EV), implied market capitalization, and implied share price for Hawaiian Airlines. All monetary values are to be appropriately rounded.
Transcribed Image Text:# Data Table: Airline Financial Metrics
This table presents key financial metrics for various airlines as sourced from Morningstar and Yahoo Finance in April 2019. The table can be exported to a spreadsheet for further analysis using the provided icon link.
| Company Name | Market Capitalization ($M) | Enterprise Value (EV) ($M) | EV/Sales | EV/EBITDA | EV/EBIT | P/E | P/Book |
|--------------|-----------------------------|----------------------------|----------|-----------|--------|-----|--------|
| Delta Air Lines (DAL) | 39,057 | 47,060 | 1.1x | 6.0x | 8.6x | 10.2x | 2.9x |
| American Airlines (AAL) | 15,295 | 33,745 | 0.8x | 6.3x | 10.5x | 11.2x | 1.3x |
| United Continental (UAL) | 22,648 | 32,143 | 0.8x | 5.8x | 9.7x | 11.0x | 2.3x |
| Southwest Airlines (LUV) | 29,431 | 29,119 | 1.3x | 6.5x | 8.9x | 12.4x | 3.0x |
| Alaska Air (ALK) | 7,236 | 8,103 | 1.0x | 7.7x | 12.3x | 16.6x | 1.9x |
| JetBlue Airways (JBLU) | 5,008 | 5,791 | 0.8x | 7.3x | 19.2x | 27.7x | 1.1x |
| SkyWest (SKYW) | 3,000 | 5,471 | 1.7x | 6.7x | 11.3x | 11.0x | 1.5x |
| Hawaiian (HA) | 1,366 | 1,575 | 0.6x | 3.4x | 4.8x | 6.1x |
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