IPO Project Valuation Models

Student Name(s):
 SULLY'S Current Financial Information
Please input values into the Yellow Boxes, DO NOT round to 000s
(note values on SULLY'S financials are in 000s)
I. Income Statement
Current EBIT = $ 179,003,000
Current Interest Expense = $ 13,887,000
Current Capital Spending $ 32,948,000
Current Depreciation and Amortization = $ 4,860,000
Current Revenues = $ 917,760,000

II. Balance Sheet This period Last period

Current Non-cash Working Capital = $ 112,151,000 $ 73,830,000
Book Value of Debt = $ 391,057,000 $ 395,017,000
Book Value of Equity = $ (87,297,000) $ (191,085,000)
Cash & Marketable Securities = $ 95,788,000

III. Tax Information

Marginal tax rate = 35.00%

IV. Discount Rate Inputs

Current Cost of Borrowing = 3.55%
Current Market Value of Debt = $ 391,057,000

V. Stable Growth Inputs

Expected Revenue Growth Rate in Perpetutity = 2.16% Speed of convergence
Expected Operating Margin = 21.40% 2
Expected Debt to Capital(MV) Ratio for the Firm = 21.10%
Expected Beta = 0.93
Expected Cost of Debt = 4.78%
Return on Equity = 27.03%
Return on Capital for the Firm = 21.98%

VI. Per Share Inputs

Number of Shares Outstanding = 195,745,670

VII. General Information

Current long term government bond rate = 2.19%
Estimated Market Risk Premium = 5.00%

VIII. Expected Revenue Growth

Year Expected Growth Rate
1 7.14%
2 6.97%
3 6.80%
4 6.63%
5 6.46%
6 6.29%
7 6.12%
8 5.95%
9 5.78%
10 5.42%
Compounded Average 6.35%
 DCF VALUATION
Base 1 2 3 4 5 6 7 8 9 10 Terminal Year
Revenue Growth Rate 7.14% 6.97% 6.80% 6.63% 6.46% 6.29% 6.12% 5.95% 5.78% 5.42% 2%
Revenues $917,760,000 $983,288,064 $1,051,823,242 $1,123,347,223 $1,197,825,143 $1,275,204,648 $1,355,415,020 $1,438,366,419 $1,523,949,221 $1,612,033,486 $1,699,405,701 $1,736,112,864
Operating Margin 19.50% 20.14% 20.56% 20.84% 21.03% 21.15% 21.23% 21.29% 21.33% 21.35% 21.37% 21.40%
EBIT $179,003,000 $197,997,091 $216,228,384 $234,086,711 $251,849,300 $269,710,442 $287,803,090 $306,214,564 $324,997,932 $344,180,263 $363,114,162 $371,528,153
Taxes $62,651,050 $69,298,982 $75,679,934 $81,930,349 $88,147,255 $94,398,655 $100,731,082 $107,175,097 $113,749,276 $120,463,092 $127,089,957 $130,034,854
EBIT(1-t) $116,351,950 $128,698,109 $140,548,449 $152,156,362 $163,702,045 $175,311,787 $187,072,009 $199,039,467 $211,248,656 $223,717,171 $236,024,206 $241,493,299
+ Depreciation $4,860,000 $5,182,218 $5,516,989 $5,864,008 $6,222,885 $6,593,147 $6,974,231 $7,352,234 $7,511,042 $7,673,281 $7,839,024 $8,008,347
- Capital Expenditure $32,948,000 $35,300,487 $37,760,931 $40,328,674 $43,002,466 $45,780,425 $48,660,014 $51,638,006 $54,710,468 $57,872,733 $61,009,435 $27,252,102
- Chg WC $38,321,000 $8,007,581 $8,375,053 $8,740,287 $9,101,261 $9,455,837 $9,801,771 $10,136,727 $10,458,286 $10,763,967 $10,676,954 $4,485,644
FCFF $49,942,950 $90,572,259 $99,929,454 $108,951,408 $117,821,204 $126,668,672 $135,584,455 $144,616,968 $153,590,944 $162,753,752 $172,176,840 $217,763,900
NOL $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
Terminal Value $5,594,682,569

Cost of Capital Calculations

Tax Rate 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00% 35.00%
Debt Ratio 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 84.22% 80.27% 73.70% 60.55% 21.10% 21.10%
Beta 0.73 0.73 0.73 0.73 0.73 0.73 0.77 0.81 0.85 0.89 0.93 0.93
Cost of Equity 5.84% 5.84% 5.84% 5.84% 5.84% 5.84% 6.04% 6.24% 6.44% 6.64% 6.84% 6.84%
Cost of Debt 3.55% 3.55% 3.55% 3.55% 3.55% 3.55% 3.80% 3.86% 3.96% 4.17% 4.78% 4.78%
After-tax cost of debt 2.31% 2.31% 2.31% 2.31% 2.31% 2.31% 2.47% 2.51% 2.57% 2.71% 3.11% 3.11%
Cost of Capital 2.31% 2.31% 2.31% 2.31% 2.31% 2.31% 3.03% 3.24% 3.59% 4.26% 6.05% 6.05%

Computed Variables (These are measures of how efficiently your firm is investing over time)
Total Capital Invested $303,760,000.00 $ 341,885,851 $ 382,504,846 $ 425,709,799 $ 471,590,641 $ 520,233,756 $ 571,721,310 $ 626,143,809 $ 683,801,520 $ 744,764,940 $ 808,612,305 $ 832,341,705
Reinvestment Rate 57.08% 29.62% 28.90% 28.40% 28.03% 27.75% 24.16% 23.27% 21.77% 18.79% 9.83% 9.83%
Increase in Revenue/Increase in Capital 1.72 1.69 1.66 1.62 1.59 1.56 1.52 1.48 1.44 1.37 1.55
Return on Capital 42.37% 41.11% 39.78% 38.45% 37.17% 35.96% 34.81% 33.74% 32.72% 31.69% 21.98%

Present Value Calculations

Cumulative WACC 1.02308244 1.04669768040159 1.07085801750597 1.09557603415807 1.12086460296295 1.1548453799112 1.1923095255127 1.235126834087 1.287730208375 1.36566798023665
Present Value of FCFF $ 88,528,798 $ 95,471,172 $ 101,742,161 $ 107,542,699 $ 113,009,789 $ 117,404,855 $ 121,291,464 $ 124,352,366 $ 126,388,083 $ 126,075,183
Present Value of Terminal Value $ 4,096,663,794

The Valuation
PV of FCFF during high growth phase = $ 1,121,806,569
PV of Terminal Value = $ 4,096,663,794
Value of Operating Assets of the firm = $ 5,218,470,363
Value of Cash & Non-operating assets= $ 95,788,000
Value of Firm = $ 5,314,258,363
- Value of Outstanding Debt = $ 391,057,000
Value of Equity = $ 4,923,201,363
Value of Equity in Common Stock = $ 4,923,201,363
Value of Equity per share = $ 25.15
 MULTIPLES VALUATION

Equity Multiples

P / E Ratio 54.30
SULLY'S Price per Share $ 28.42

PEG 1.00
Estimated EPS Growth Rate 8.00%
SULLY'S Price per Share $ 4.19

P/Sales 5.03
SULLY'S Price per Share $ 23.58

Enterprise Multiples

EV/EBITDA 26.20
SULLY'S Price per Share $ 24.61

EV/Sales 5.40
SULLY'S Price per Share $ 25.32
 Industry Name Number of firmsUnlevered Beta Debt / Equity Debt / Value Equity / Value ROE ROC Effective Tax Rate
After-tax Operating Margin
Net Margin Sales/Capital EV/Sales
Advertising 31 1.75 43.26% 30.20% 69.80% 8.89% 10.54% 10.73% 7.44% 3.63% 1.42 1.14
Beverage 34 0.77 26.52% 20.96% 79.04% 24.58% 12.95% 19.14% 15.60% 13.99% 0.83 3.03
Chemical 31 1.39 22.37% 18.28% 81.72% 19.26% 13.81% 21.73% 9.30% 8.79% 1.48 1.62
Diversified Co. 107 0.71 102.24% 50.55% 49.45% 33.28% 8.01% 15.55% 11.76% 9.21% 0.68 2.11
Drug 279 1.08 15.46% 13.39% 86.61% 22.64% 15.02% 5.36% 16.96% 17.99% 0.89 2.85
Food Products 112 0.73 29.53% 22.80% 77.20% 13.39% 11.88% 20.00% 14.62% 7.93% 1.82 1.08
Healthcare Information 25 1.20 6.35% 5.97% 94.03% 11.00% 9.45% 22.19% 7.64% 8.81% 1.24 3.82
Household Products 26 0.95 18.99% 15.96% 84.04% 21.80% 14.52% 25.12% 12.79% 11.66% 1.13 2.21
Insurance 30 1.54 64.14% 39.08% 60.92% 10.45% NA 28.04% NA NA NA NA
Packaging & Container 26 0.88 51.82% 34.13% 65.87% 17.52% 10.40% 24.23% 7.02% 13.46% 1.48 1.06
Paper/Forest Products 32 0.96 59.86% 37.45% 62.55% 8.40% 11.01% 10.61% 9.84% 4.63% 1.12 1.06
Pharmacy Services 19 1.00 20.48% 17.00% 83.00% 14.82% 11.18% 24.67% 3.14% 2.91% 3.56 0.53
Retail Store 37 1.14 25.58% 20.37% 79.63% 21.01% 13.60% 25.02% 3.83% 3.45% 3.55 0.59
Retail/Wholesale Food 30 0.64 41.34% 29.25% 70.75% 16.43% 10.38% 31.21% 2.07% 4.16% 5.02 0.35
Toiletries/Cosmetics 15 1.20 20.64% 17.11% 82.89% 62.53% 19.54% 20.30% 7.24% 7.37% 2.70 1.48
Average 5891 0.92 46.64% 31.81% 68.19% 16.07% 12.21% 15.48% 12.62% 8.32% 0.97 1.67
 Company Name Brief Business Description Stock Price
PetMed Express Online pet pharmacy offering prescription and non-prescription pet medications and other health products for dogs, cats and horses $ 16.83
IDEXX Labs The global market leader in diagnostics and information technology solutions for animal health and water and milk quality $ 77.03
Zoetis World's largest producer of medicine and vaccinations for pets and livestock $ 46.96
Freshpet Manufacturer of refrigerated food and treats for dogs and cats using natural ingredients, and are the first in the fresh and refrigerated category to be distributed across North America $ 13.18
Trupanion Trupanion is a pet insurance provider that offers and administers cat and dog insurance in the United States, Canada and Puerto Rico $ 7.24
Hormel Foods A food company that produces Spam luncheon meat $ 63.59
ConAgra Foods $ 43.95
Mondelez International $ 44.00
Pinnacle Foods Packaged foods company that specializes in the shelf stable and frozen $ 46.77
Nestlé Swiss multinational food and beverage company, Subsidiary Nestlé Purina Petcare produces and markets pet food, treats and litter $ 76.20
Colgate-Palmolive American multinational consumer products company, including subsidairy Hills Pets which produces high quality pet foods $ 66.29
WhiteWave Foods Consumer packaged food and beverage company that sells branded plant-based foods and beverages, coffee creamers and beverages, premium dairy products, and organic produce $ 46.44
United Natural Foods Leading national distributor of natural and organic foods, specialty foods, and related products $ 49.12
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Computed
Average $ 45.97
 Shares EPS Growth P/E PEG
Outstanding Market Cap Enterprise Sales Revenue EBITDA 5-Year 5-Year 5-Year
Beta EPS
(Mils.) ($ Bils.) Value ($ Bils.) Growth ($ Bils.) Estimate Estimate Estimate P / Sales EV / EBITDA EV / Sales
20.33 $ 0.34 $ 0.283 0.38 $ 0.228 (0.76%) $ 0.031 $ 0.92 5.00% 18.29 3.66 1.50 9.05 1.24
92.00 $ 7.09 $ 7.950 0.85 $ 1.560 7.93% $ 0.332 $ 2.11 14.33% 36.51 2.55 4.54 23.96 5.10
498.94 $ 23.43 $ 27.010 0.92 $ 4.810 5.79% $ 1.390 $ 1.67 12.68% 28.12 2.22 4.87 19.43 5.62
33.50 $ 0.44 $ 0.422 1.16 $ 0.102 14.80% $ 0.156 $ (0.10) 25.00% (131.80) (5.27) 4.31 2.70 4.12
28.27 $ 0.20 $ 0.172 1.24 $ 0.131 15.86% $ (0.017) $ (0.65) 24.09% (11.14) (0.46) 1.56 (10.31) 1.31
264.28 $ 16.81 $ 15.800 1.37 $ 9.500 7.35% $ 1.150 $ 2.54 12.01% 25.04 2.08 1.77 13.74 1.66
431.75 $ 18.98 $ 26.820 0.38 $ 15.830 5.56% $ 2.110 $ 2.24 8.04% 19.62 2.44 1.20 12.71 1.69
1610.00 $ 70.84 $ 90.200 1.46 $ 32.590 (3.25%) $ 5.070 $ 1.27 (8.81%) 34.65 (3.93) 2.17 17.79 2.77
116.59 $ 5.45 $ 7.750 0.27 $ 2.630 9.54% $ 0.459 $ 2.21 23.33% 21.16 0.91 2.07 16.90 2.95
3132.00 $ 238.66 $ 261.660 - $ 89.870 (0.97%) $ 17.860 $ 3.43 5.35% 22.22 4.15 2.66 14.65 2.91
900.13 $ 59.67 $ 65.640 0.98 $ 16.740 2.42% $ 4.550 $ 2.84 7.58% 23.34 3.08 3.56 14.43 3.92
175.76 $ 8.16 $ 9.730 1.72 $ 3.600 10.69% $ 0.415 $ 1.16 20.31% 40.03 1.97 2.27 23.42 2.70
50.09 $ 2.46 $ 2.840 1.42 $ 7.890 14.48% $ 0.290 $ 2.86 12.31% 17.17 1.40 0.31 9.80 0.36

12.09% 25.15 2.45 2.48 15.81 2.82

565.66 $ 34.81 $ 39.714 1.01 $ 14.268 6.88% $ 2.600 $ 1.73 12.38% 11.02 1.14 2.52 12.94 2.80