Suppose you are asked to value Jakson Inc given the following information Jakson Inc. is a nationwide retail chain specializing in women's apparel. The company has 135 million shares outstanding, 30% of which are publicly traded with a current market price of $5.63 per share. The company is expected to have net earnings of $29 million in the next 12 months. Forecast for sales and EBITDA are $533 million and $47 million respectively. Suppose you are asked to value Jakson given the following information in addition to that noted above (all are comparable public companies): Company Price to Earnings Price to Sales Comparable Company A 13.04 1.58 Comparable Company B 26.10 .78 Comparable Company C 15.36 1.41 Comparable Company D 18.59 .96 Comparable Company E 14.11 1.06 Using a relative value approach, what is your estimate for the value of equity of the company based on financial information and the above table? Note that your answer may be different than the trade value based on market price.
Dividend Valuation
Dividend refers to a reward or cash that a company gives to its shareholders out of the profits. Dividends can be issued in various forms such as cash payment, stocks, or in any other form as per the company norms. It is usually a part of the profit that the company shares with its shareholders.
Dividend Discount Model
Dividend payments are generally paid to investors or shareholders of a company when the company earns profit for the year, thus representing growth. The dividend discount model is an important method used to forecast the price of a company’s stock. It is based on the computation methodology that the present value of all its future dividends is equivalent to the value of the company.
Capital Gains Yield
It may be referred to as the earnings generated on an investment over a particular period of time. It is generally expressed as a percentage and includes some dividends or interest earned by holding a particular security. Cases, where it is higher normally, indicate the higher income and lower risk. It is mostly computed on an annual basis and is different from the total return on investment. In case it becomes too high, indicates that either the stock prices are going down or the company is paying higher dividends.
Stock Valuation
In simple words, stock valuation is a tool to calculate the current price, or value, of a company. It is used to not only calculate the value of the company but help an investor decide if they want to buy, sell or hold a company's stocks.
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