Financial Managment
SeaHorse – Stock Evaluation Group Project – Financial Management Section II
Date: 15-Apr-13 By: Spiros KOURTIS – Christos THEODOROU Evi BAXEVANAKI – Georgia LIAPI.
Page 1
Key data for the calculations: • • • Stock issued for Seahorse = [IS] = 2 Shareholders x 150,000 shares / each = 300,000 stocks Dividends paid D0 = 2 x $320,000 = $640,000 or DPS = $640,000 / 300,000 = $2.13 Calculation of company SeaHorse growth rate gSH = ( 1 – Dividend pay out Ratio) x ROE Dividend Payout Ratio (DPR) is equal to:
$640.000 Dividends Dividends Shares = DPS = 300.000 = 42.99% DPR = = EPS 5.08 Net.Income Net.Income Shares
Therefore gSH = ( 1 – 42.99% ) x 25% = 14.25% • Calculation of Industry average growth rate Since Nautigas EPS = -0.32 due to accounting write off we have to recalculated the new growth rate for the Industry using Nautigas EPS = $1.97 without the accounting write off. Therefore the new EPSindustry=[1.09 + 1.16 +1.97]/3 = $1.406 Using the same method as above we have: gindustry = ( 1 – DPRindustry ) x ROEindustry = ( 1 – DPSindustry / EPSindustry ) x ROEindustry or gindustry = ( 1 – 0.41 / 1.406 ) x 13 = 9.21 %
Question No1. Growth of the SeaHorse gSH = 14.25%, D0 = $640,000 / 300,000 = $ 2.13 and kS=20% Applying constant growth model (Gordon’s formula):
ˆ D (1+ g) = $2.13(1+14.25%) = $42.32 P0 = 0 ks − g 20% −14.25%
Question No2. Growth of the SeaHorse gSH = 14.25%, gindustry = ( 1 – 0.41 / 1.406 ) x 13 = 9.21 % and D0 = $640,000 / 300,000 = $ 2.13 and kS change from 20% to 17%.
P0 = $2.13 + $2.44 x PVIFA17% 1 + $2.79 x PVIFA17% 2 + $3.20 x PVIFA17% 3 + $3.66 x PVIFA17% 4 + $4.19 x PVIFA17% 5 + P5 where P5 = D5 x (1+ gindustry) / [kS - gindustry] = $58.128
Substituting all numbers we have P0 = $ 36.44
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Graphical Representation of the calculation
Question No3 We know that P / E = Price of Stock / Earning per share (EPS). Therefore by using the available data the Industry average value is: P/E = $16.91 / $1.406 or P/E = 12,027 Average P/E of
Date: 15-Apr-13 By: Spiros KOURTIS – Christos THEODOROU Evi BAXEVANAKI – Georgia LIAPI.
Page 1
Key data for the calculations: • • • Stock issued for Seahorse = [IS] = 2 Shareholders x 150,000 shares / each = 300,000 stocks Dividends paid D0 = 2 x $320,000 = $640,000 or DPS = $640,000 / 300,000 = $2.13 Calculation of company SeaHorse growth rate gSH = ( 1 – Dividend pay out Ratio) x ROE Dividend Payout Ratio (DPR) is equal to:
$640.000 Dividends Dividends Shares = DPS = 300.000 = 42.99% DPR = = EPS 5.08 Net.Income Net.Income Shares
Therefore gSH = ( 1 – 42.99% ) x 25% = 14.25% • Calculation of Industry average growth rate Since Nautigas EPS = -0.32 due to accounting write off we have to recalculated the new growth rate for the Industry using Nautigas EPS = $1.97 without the accounting write off. Therefore the new EPSindustry=[1.09 + 1.16 +1.97]/3 = $1.406 Using the same method as above we have: gindustry = ( 1 – DPRindustry ) x ROEindustry = ( 1 – DPSindustry / EPSindustry ) x ROEindustry or gindustry = ( 1 – 0.41 / 1.406 ) x 13 = 9.21 %
Question No1. Growth of the SeaHorse gSH = 14.25%, D0 = $640,000 / 300,000 = $ 2.13 and kS=20% Applying constant growth model (Gordon’s formula):
ˆ D (1+ g) = $2.13(1+14.25%) = $42.32 P0 = 0 ks − g 20% −14.25%
Question No2. Growth of the SeaHorse gSH = 14.25%, gindustry = ( 1 – 0.41 / 1.406 ) x 13 = 9.21 % and D0 = $640,000 / 300,000 = $ 2.13 and kS change from 20% to 17%.
P0 = $2.13 + $2.44 x PVIFA17% 1 + $2.79 x PVIFA17% 2 + $3.20 x PVIFA17% 3 + $3.66 x PVIFA17% 4 + $4.19 x PVIFA17% 5 + P5 where P5 = D5 x (1+ gindustry) / [kS - gindustry] = $58.128
Substituting all numbers we have P0 = $ 36.44
Page 2
Graphical Representation of the calculation
Question No3 We know that P / E = Price of Stock / Earning per share (EPS). Therefore by using the available data the Industry average value is: P/E = $16.91 / $1.406 or P/E = 12,027 Average P/E of