Question Description
Use SouthwestAirlines Enterprise Value PEG Model below . Complete a case study of relative valuation. Analyze thevalue of your subject company compared to average industry [e.g., XLF] andcohort (2-4 comparable companies) values.
Present Relative Valuation (Valuation by Comparables) –
1. Use appropriate relative valuation models and conduct a Valuation byComparables of the company that you selected to study. Select ameaningful Return Ratio and Price Ratio or multiple. Consider using themost recent 3-5 annual or quarterly periods with mean/median and standarddeviation. [Keep in mind you have a worksheet from Analysis Paper 1 that can beused/revised.]
How do you interpret and explain the results? Why did you choose theratios used for the comparison?
Present Enterprise Value and EV / EBITDA Ratio –
2. Post the results of the Enterprise Value of Southwest Airlines, along withits EV/EBITDA ratio, P/E Ratio, and PEG Ratio, along with those of a fewcompetitors. Use normalized values – mean/median and standard deviation forindustry [e.g., XLF] and cohort.
What do the results mean?
| Enterprise Value/EBITDA and PEG Ratio | ||||||||||||||||||
| Source of Data: MSN.com | Data As Of: | 24-May-18 | ||||||||||||||||
| FIRM NAME(S) | AAL | ALK | UAL | DAL | LUV | Average | ||||||||||||
|
|
||||||||||||||||||
| COMMON STOCK OUTSTANDING | 468.2 | 123.3 | 227.3 | 698.9 | 579.8 | 419.5 | Number of Shares (Diluted Weighted Average) | |||||||||||
| RECENT SHARE PRICE | $43.56 | $59.87 | $70.47 | $54.40 | $51.21 | $55.90 | Current Stock Price | |||||||||||
| TOTAL DEBT | $24,740.0 | $2,580.0 | $14,960.0 | $9,710.0 | $3,227.0 | $11,043.4 | L/T, S/T & Current Portion of L/T | |||||||||||
| TOTAL CASH AND LIQUID INVESTMENTS | $5,066.0 | $1,620.0 | $6,352.0 | $2,491.0 | $1,495.0 | $3,404.8 | Cash & S/T Investments | |||||||||||
| EBITDA |
|
$4,053.0 | $1,521.0 | $5,258.0 | $9,934.0 | $4,546.0 | $5,062.4 | Normalized EBITDA | ||||||||||
| NET INCOME | $1,919.0 | $1,030.0 | $2,180.0 | $3,560.0 | $3,488.0 | $2,435.4 | Net Income | |||||||||||
| L/T GROWTH RATE | 11.51% | 12.90% | 19.60% | 12.90% | 21.10% | 15.60% | Earnings Growth Rate – Next 5 years | |||||||||||
| COMPUTER-GENERATED CALCULATIONS | ||||||||||||||||||
| COMPANY | AAL | ALK | UAL | DAL | LUV | Average | ||||||||||||
| MARKET CAPITALIZATION | $20,392.6 | $7,379.6 | $16,015.4 | $38,019.1 | $29,691.7 | $22,299.7 | ||||||||||||
| ENTERPRISE VALUE | $40,066.6 | $8,339.6 | $24,623.4 | $45,238.1 | $31,423.7 | $29,938.3 | ||||||||||||
| EV/EBITDA RATIO | 9.89 | 5.48 | 4.68 | 4.55 | 6.91 | 6.30 | ||||||||||||
| P/E RATIO | 10.63 | 7.16 | 7.35 | 10.68 | 8.51 | 8.87 | ||||||||||||
| PEG RATIO | 0.92 | 0.56 | 0.37 | 0.83 | 0.40 | 0.62 | ||||||||||||
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