Westfarmenr
Prospective analysis
In Wesfarmers, the forecasting next five year chart shows that sales revenue in 2011 will be 8% and it will keep the growth rate at 4% from 2013 to 2015. Because the assets turnover is rarely changed, the report estimate the rate as 1.69, which is the same record as the Wesfarmers 2010 annual report. The profit margin is change largely these years. So the report takes 7.5%, which is the average rate of five year accounting numbers. This report will use the forecasting numbers above, so it can analysis the future performance of Wesfarmers and estimate value per share of common stock for shareholders by following four valuation methods.
1. Discount dividend model 2. Discounted abnormal earnings model 3. Discounted cash flow valuation 4. Discounted abnormal operating earnings model
In 30 June, 2010, the market per share of Wesfarmers is $27.8. Currently, the market share price of common stock is $33.08 in 27 May, 2011. The share price rise about 19%. The current market price is quite close to the results of four valuation models, which use WACC and CAPM to evaluate total value in the Wesfarmers. From the forecasting date, it seems that the common stock is slightly undervalued. The report will choose the most suitable valuation models and give reasonable recommendation for the common shareholders at the end.
Discount dividend model is the foundation of others popular valuation models and the usage is widespread in most firms. In Figure 1, the chart use discount dividend model valued the firm per share at $40.88, which is trading at a $7.8 discount in the market. However, Discount dividend model is not the perfect measure because it not link to value added. Although the firm value will seem to be higher, there is no actual value create into the wealth. In other words, this model is focus on creation of capital, instead of division of capital.
Discounted abnormal earnings model forecasts residual income which measures the
In Wesfarmers, the forecasting next five year chart shows that sales revenue in 2011 will be 8% and it will keep the growth rate at 4% from 2013 to 2015. Because the assets turnover is rarely changed, the report estimate the rate as 1.69, which is the same record as the Wesfarmers 2010 annual report. The profit margin is change largely these years. So the report takes 7.5%, which is the average rate of five year accounting numbers. This report will use the forecasting numbers above, so it can analysis the future performance of Wesfarmers and estimate value per share of common stock for shareholders by following four valuation methods.
1. Discount dividend model 2. Discounted abnormal earnings model 3. Discounted cash flow valuation 4. Discounted abnormal operating earnings model
In 30 June, 2010, the market per share of Wesfarmers is $27.8. Currently, the market share price of common stock is $33.08 in 27 May, 2011. The share price rise about 19%. The current market price is quite close to the results of four valuation models, which use WACC and CAPM to evaluate total value in the Wesfarmers. From the forecasting date, it seems that the common stock is slightly undervalued. The report will choose the most suitable valuation models and give reasonable recommendation for the common shareholders at the end.
Discount dividend model is the foundation of others popular valuation models and the usage is widespread in most firms. In Figure 1, the chart use discount dividend model valued the firm per share at $40.88, which is trading at a $7.8 discount in the market. However, Discount dividend model is not the perfect measure because it not link to value added. Although the firm value will seem to be higher, there is no actual value create into the wealth. In other words, this model is focus on creation of capital, instead of division of capital.
Discounted abnormal earnings model forecasts residual income which measures the