Valuation Using Balance Sheet Multiples The following table provides summary data for Guess? Inc. and its competitors, Ralph Lauren Corp. and The Gap Inc. In millions Company assumed value. Equity assumed value Net operating assets. Book value of equity... Net nonoperating obligations (assets) Common shares outstanding. Guess? $606 $837 $(171) 65.6 shares Ralph Lauren $ 8,906 $10,014 $ 2.179 $ 3.287 $(1,108) 77.2 shares The Gap $9,440 $9.560 $3,433 $3,553 $ (120) 375.8 shares Required a. Compute the price to net operating assets ratio for both Ralph Lauren and Gap. 6. Use Ralph Lauren and Gap as comparables, along with the price to NOA ratios from part a, and then estimate for Guess? its company intrinsic value, its equity intrinsic value, and its equity intrinsic value per share. c. Compute the PB ratio for both Ralph Lauren and Gap. d. Use Ralph Lauren and Gap as comparables, along with the PB ratios from part c, and then estimate for Guess? its equity intrinsic value and its equity intrinsic value per share.
Valuation Using Balance Sheet Multiples The following table provides summary data for Guess? Inc. and its competitors, Ralph Lauren Corp. and The Gap Inc. In millions Company assumed value. Equity assumed value Net operating assets. Book value of equity... Net nonoperating obligations (assets) Common shares outstanding. Guess? $606 $837 $(171) 65.6 shares Ralph Lauren $ 8,906 $10,014 $ 2.179 $ 3.287 $(1,108) 77.2 shares The Gap $9,440 $9.560 $3,433 $3,553 $ (120) 375.8 shares Required a. Compute the price to net operating assets ratio for both Ralph Lauren and Gap. 6. Use Ralph Lauren and Gap as comparables, along with the price to NOA ratios from part a, and then estimate for Guess? its company intrinsic value, its equity intrinsic value, and its equity intrinsic value per share. c. Compute the PB ratio for both Ralph Lauren and Gap. d. Use Ralph Lauren and Gap as comparables, along with the PB ratios from part c, and then estimate for Guess? its equity intrinsic value and its equity intrinsic value per share.
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
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Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
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Transcribed Image Text:15-44. Valuation Using Balance Sheet Multiples
The following table provides summary data for Guess? Inc. and its competitors, Ralph Lauren Corp.
and The Gap Inc.
In millions
Company assumed value..
Equity assumed value
Net operating assets..
Book value of equity...
Net nonoperating obligations (assets)
Common shares outstanding.
Guess?
$666
$ 837
$(171)
65.6 shares
Ralph Lauren
$ 8,906
$10,014
$ 2.179
$ 3,267
$(1,108)
77.2 shares
The Gap
$9,440
$9,560
$3,433
$3,553
$ (120)
375.8 shares
Required
a. Compute the price to net operating assets ratio for both Ralph Lauren and Gap.
b. Use Ralph Lauren and Gap as comparables, along with the price to NOA ratios from part a, and then
estimate for Guess? its company intrinsic value, its equity intrinsic value, and its equity intrinsic value
per share.
c. Compute the PB ratio for both Ralph Lauren and Gap.
d. Use Ralph Lauren and Gap as comparables, along with the PB ratios from part c, and then estimate
for Guess? its equity intrinsic value and its equity intrinsic value per share.
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Step 1: Explain trading Comps approach of stock valuation.
VIEWStep 2: a) Compute price to net operating assets ratio of Ralph Lauren & The Gap
VIEWStep 3: b) Use Price to NOA ratio from (a) to compute values for guess Inc.
VIEWStep 4: c) Compute PB ratio for Ralph Lauren & The Gap
VIEWStep 5: d) Use PB comparables approach to value Guess Inc.
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