Question

# You would like to use multiples analysis to estimate stock price of Samsung. The following information...

You would like to use multiples analysis to estimate stock price of Samsung. The following information is available to you. You know that Samsung has sales of \$700 millions and EBITDA of \$500 million. Samsung has net debt of \$220 million and 100 million shares outstanding. You also know the following about LG and Sony. Enterprise value for Sony and LG are \$800 million and \$1,300 million respectively. Sony’s sales and EBITDA are \$235 million and \$115 million. LG’s sales is \$550 million and EBITDA is \$400 million. What is your best estimate of Samsung’s stock price?

Enterprise value to EBITDA for Sony (EV/EBITDA) = 800/115 = 6.96 times

Enterprise Value to EBITDA for LG = 1,300/400 = 3.25 times

EV/Sales for Sony = (800/235) = 3.4 times

EV/Sales for LG = (1300/550) = 2.36 times

Average EV/EBITDA = 6.96+3.25/2 = 5.1 times

So, Samsung's EV using EV/EBITDA = 5.1* EVBITDA = 5.1 * 500 M = \$ 2552.5 M

Average EV/Sales = (3.4 + 2.36) / 2 = 2.88 times

Samsung's EV using EV/Sales = 2.88* 700 M = \$ 2016 M

So EV range for Samsung { 2016 , 2552.5}

For the lower range MV of samsung = EV - Net Debt = 2016 - 220 = \$ 1796 M

Price per share = 1796/number of shares o/s = 1796 / 100 M = \$ 17.96

For the upper range, MV of samsung = 2552.5 - 220 =\$ 2332.5

Price per share = \$ 2332/100 = \$ 23.32

So the range of prices for Samsung is {17.96 23.32}

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