Price Performance Risk Adj Returns % Past Month % Quarter % Half Year % 1 Year XXX PlC FTSE-100 Risk Adj. Data as of XX/04/2020 Source: XXX XXXX PLC Adj. Beta or Beta P/Book OP Margin XXX FY 2020 Estimate FY 2021 Estimate FY 2022 Estimate FY 2023 Valuations PE DY PB PS DDM XXX PLC Sector/industry : Ticker : XXX LN Date: XXXX Company Profile: Market Price: XXX GBp Our Valuation: XXX GBp Our Recommendation: XXX XXX PLC vs FTSE 100 Analyst’s Recommendation: XXX Analyst’s Consensus: BUY: XXX HOLD: XXX SELL: XXX Introduction: About the company Risk Adjusted Returns: Calculations of monthly risk adjusted returns using 2 year adjusted beta as XX/04/2020 = XXXX. Company return – beta*return on market (assume alpha=0) News: Date News Summary Brief Comments XX/XX/2020 12:53:32 Firm Specific XX/XX/2020 11:46:41 Firm Specific XX/XX/2020 22:36:24 Systematic XX/XX/2020 18:43:22 Systematic XXX PLC (%) FTSE-100 (%) Numerical Calculations Risk Adjusted Returns (%) Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Valuation: Multi-stage DDM: The performance of DPS has been a solid state of steady growth, with the compound annual growth rate from 2011-2020 at XXX%. The EPS growth was not as steady and fluctuated sharply, especially in 20XX, however recovering the following year. The compounding annual growth rate for EPS 2011-2020 was XX%. DPS EPS ROE B (1-Payout Ratio) G DPS Growth EPS Growth 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 For illustration purposes only and numbers/calculations might not be accurate Firstly, will be calculated using the CAPM formula to help find the intrinsic value of the share using the discount dividend model. The current UK risk free rate is 1.6% (return on a 10y gilt), the UK 1yr expected return is 6.6% (5% + 1.6%) and the 2yr adjusted company beta is 1.788. Using these numerical
values the cost of equity for XXX LN can be calculated as: = + (()
= 0.016 + 1.788 (0.066 0.016) = 0.1054 10.54% In order for greater accuracy the DPS for 2020 will be used as it is the most up to date data. The DPS and EPS for 2020 are 217.47GBp and 184.08GBp respectively. The plowback ratio can be calculated as: = 1 % 2020 2020- = XXX The ROE for 2020 was 20.13% and this value allows for an estimation calculation for the long term growth rate, seen in column G in the table above: = 2020 = XXX For the years 2021, 2022 and 2023 I used XXXX estimates for the DPS as they are a well-respected provider of market information. They were as follows: Estimate 2021 = 203.50, Estimate 2021 = 205.35 and Estimate 2022 = 208.62. For the years 2024 and 2025 I estimate that dividends will grow at a rate of XXXX% per annum. This figure is derived from the XXXXX . The above for illustration purposes only you can arrive to the g number 2024 onwards based on another sequence of assumptions which will enable you to calculate the multistage DDM. Economic Model Forecast: The growth rate used here was XXX%. This is the Bank of England’s Inflation rate of XXX% plus the UK long term growth potential of XXX%. Valuation by Comparable Methods: For illustration purposes only and numbers/calculations might not be accurate Fair Value by PE: Using the value of 25.04 as the PE for the sector median and 1.84 as the current EPS. All data was sourced from XXX. ( ) = × = 25.04 1.84 = 4607.36 Fair Value by DY: The
dividend yield for the sector median is 3.64% and the current DPS for
XXX LN is 2.17 ( ) = = 2.170.0364 = 59.615 = 5961.54 Fair Value by PB: XXX provides the price to book of XXX LN and the sector median of 5.69 and 4.13 respectively. The current market price of XXX on 6th March 2020 was 4838.50, therefore the BPS can be calculated and thus the fair value: = = 4838.505.69 = 850.35 ( ) = × = 850.35 4.13 = 3511.95 Fair Value by PS: The price to sales for XXX LN and the sector median are 3.79 and 3.69 respectively. The SPS (Sales per share) can be calculated and thus the fair value:
= “#$%&”’ () ” *+
,-.& = /010.341.56 = 1276.65 ( ) = × = 1276.65 3.69 =
4710.84 Comparable Valuation Results: For illustration purposes only and numbers/calculations might not be accurate After calculating the results for PE, DY, P/B and P/S, I will utilise a weighting measurement to find the intrinsic value of the share. I have chosen a XXX% weighting for each of the methods. This is based on the assumption that each method is equally important. Weight Valuation Method SV (GBp) W x SV (GBp) XX% Sector Price to Earnings XX% Sector Dividend Yield XX% Sector Price to Book XX% Sector Price to Sales 100% Intrinsic Value by the Comparative Valuations Approach Why did you chose such weights and why did you included all the methods Final Valuation: Weight Valuation Method (GBp) W x SV (GBp) XXX % Multistage DDM XXX % Comparative Valuation 100.00% Intrinsic Value of XXX PLC (as of XX/04/20) Weighted Average XXX Why did you chose such weights Discussion: In the valuation of the share price using the DDM model ……. The Price Multiples methods is another simple method for valuing stocks. …… SML Analysis: Analysts Recommendation: Conclusion:
