Cfa level2 equity 질문입니다!

• 과정명: cfa level2 equity

• 강사명: 유태인 강사님

안녕하세요 강사님

Curriculum book 문제 풀다가 이해가 안되는 게 있어서 질문 드립니다.

P.474에 question 18-24에서 23번 문제 입니다.

Questions 18–24 relate to Mark Cannan
Mark Cannan is updating research reports on two well-established consumer compa- nies before first quarter 2011 earnings reports are released. His supervisor, Sharolyn Ritter, has asked Cannan to use market-based valuations when updating the reports.
Delite Beverage is a manufacturer and distributor of soft drinks and recently acquired a major water bottling company in order to offer a broader product line. The acquisition will have a significant impact on Delite’s future results.
You Fix It is a United States retail distributor of products for home improvement, primarily for those consumers who choose to do the work themselves. The home improvement industry is cyclical; the industry was adversely affected by the recent downturn in the economy, the level of foreclosures, and slow home sales. Although sales and earnings at You Fix It weakened, same store sales are beginning to improve as consumers undertake more home improvement projects. Poor performing stores were closed, resulting in significant restructuring charges in 2010.
Before approving Cannan’s work, Ritter wants to discuss the calculations and choices of ratios used in the valuation of Delite and You Fix It. The data used by Cannan in his analysis is summarized in Exhibit 1.

Exhibit 1 Select Financial Data for Delite Beverage and You Fix It
2010 Earnings per share (EPS) 2011 estimated EPS
Book value per share end of year Current share price
Sales (billions)
Free cash flow per share Shares outstanding end of year
Delite Beverage
$3.44
$3.50 $62.05 $65.50 $32.13
$2.68 2,322,034,000
You Fix It
$1.77
$1.99 $11.64 $37.23 $67.44
$0.21 1,638,821,000
Cannan advises Ritter that he is considering three different approaches to value the shares of You Fix It:
Approach 1 Approach 2 Approach 3
Price-to-book (P/B) ratio
Price-to-earnings (P/E) ratio using trailing earnings Price-to-earnings ratio using normalized earnings
Cannan tells Ritter that he calculated the price-to-sales ratio (P/S) for You Fix It, but chose not to use it in the valuation of the shares. Cannan states to Ritter that it is more appropriate to use the P/E ratio rather than the P/S ratio because:
Reason 1 Reason 2 Reason 3
Earnings are more stable than sales.
Earnings are less easily manipulated than sales.
The P/E ratio reflects financial leverage whereas the P/S ratio does not.
Cannan also informs Ritter that he did not use a price-to-cash flow multiple in valuing the shares of Delite or You Fix It. The reason is that he could not identify a cash flow measure that would both account for working capital and non-cash revenues, and also be after interest expense and thus not be mismatched with share price. Ritter advises Cannan that such a cash flow measure does exist.

Ritter provides Cannan with financial data on three close competitors as well as the overall beverage sector, which includes other competitors, in Exhibit 2. She asks Cannan to determine, based on the price-to-earnings growth (PEG) ratio, whether Delite shares are overvalued, fairly valued, or undervalued.
Exhibit 2 Beverage Sector Data
Delite
Fresh Iced Tea Company Nonutter Soda
Tasty Root Beer Beverage sector average
Forward P/E
— 16.59 15.64 44.10 16.40
Earnings Growth
12.41% 9.52% 11.94%
20% 10.80%
After providing Ritter his answer, Cannan is concerned about the inclusion of Tasty Root Beer in the comparables analysis. Specifically, Cannan asks Ritter:
“I feel we should mitigate the effect of large outliers, but not the impact of small outliers (i.e., those close to zero), when calculating the beverage sector P/E. What measure of central tendency would you suggest we use to address this concern?”
Ritter requests that Cannan incorporate their discussion points before submitting the reports for final approval.

23. Based upon the information in Exhibits 1 and 2, Cannan would most likely con-
clude that Delite’s shares are:

A overvalued.
B undervalued.
C fairly valued.

 풀이:

Delite의 PEG가 1.508이고 

경쟁업체가 순서대로 1.7426, 1.3099, 2.205와 sector average는 1.5185로

경쟁업체 평균이 1.7525, sector 1.5185로 Delite보다 높아 Delite가 undervalued로 판단했는데

해설지에는 범위의 중간에 있고 sector와 closely해서 fairvalued로 판단했는데 잘 이해가 가질 않습니다..

감사합니다.