1. Select two companies who are in similar businesses. For example Facebook and Twitter. Since we discussed these two in class, you are not allowed to select these companies. Choose one of the companies, Facebook in our in class example, as the reference company.
2. (40 Points) For both companies, download the financial statements: income statement and statement of cash flows for the trailing twelve months (TTM) (note that these are available to you from finance.yahoo.com), and the latest balance sheet. Also find out for both companies, Growth Estimates for the next 5 years.
3. (30 Points) Calculate the following ratios for both companies:
Price/Earnings
PEG (Price/Earnings over Growth)
Enterprise Value/Earnings (aka Asset P/E)
Enterprise Value/EBITDA
Cash Adjusted EV/EBITDA
For each ratio, tell me briefly what that ratio means to someone who does not know anything about finance.
3. (30 Points) Using EV/EBITDA and cash Adjusted EV/Ebitda, estimate a value for your second company by taking the value of the reference company you selected as given. For example, in class we have taken value of Facebook as given and estimated a value for Twitter.
4. (15 Points, Extra Credit). Calculate cash adjusted EV/EBITDA version of PEG ratio and estimate a value for the second company based on this new ratio,
I have attached the Excel file I used in class as a reference
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