Consider the following data for the airline industry for December 2015 ?(EVequal
ID: 2615656 • Letter: C
Question
Consider the following data for the airline industry for December 2015 ?(EVequals=enterprise ?value, Bookequals=equity book? value). Suppose Hawaiian Airlines? (HA) has 53 million shares outstanding. Estimate? Hawaiian's share value using each of the five valuation multiples shown here Market Capitalization Enterprise Value (EV) EV/Sales EV/EBITDA EV/EBIT P/E P/Book
Delta Air Lines (DAL) 40,857 45,846 1.1x 6.0x 7.6x 15.0x 4.0x
American Airlines (AAL) 27,249 38,937 0.9x 4.5x 5.5x 6.2x 7.5x
United Continental (UAL) 22,000 28,522 0.7x 4.2x 5.6x 3.4x 2.6x
Southwest Airlines (LUV) 28,499 28,125 1.5x 6.0x 7.4x 16.1x 4.1x
Alaska Air (ALK) 10,396 9,870 1.8x 6.3x 7.9x 13.4x 4.4x
JetBlue Airways (JBLU) 7,338 8,189 1.3x 6.1x 7.9x 13.8x 2.4x
SkyWest (SKYW) 1,039 2,590 0.8x 5.2x 11.1x 21.2x 0.7x
Hawaiian (HA) 1,974 2,281 1.0x 5.3x 6.9x 15.1x 5.3x
based on the median valuation multiple of the other seven airlines shown.
Calculate? Hawaiian's share values using each of the five valuation multiples? below:???(Round the median to one decimal place. Round the share price to the nearest cent. Round the EV and market cap to the nearest?integer.)
Explanation / Answer
Company Mkt Cap EV EV/Sales EV/EBITDA EV/EBIT P/E P/Book DAL 40857 45846 1.1 6 7.6 15 4 AAL 21249 38937 0.9 4.5 5.5 6.2 7.5 UAL 22000 28522 0.7 4.2 5.6 3.4 2.6 LUV 28,499 28125 1.5 6 7.4 16.1 4.1 ALK 10396 9870 1.8 6.3 7.9 13.4 4.4 JBLU 7338 8189 1.3 6.1 7.9 13.8 2.4 SKYW 1039 2590 0.8 5.2 11.1 21.2 0.7 Median value 1.1 6 7.6 13.8 4 Hawaiian Airlines? (HA)(using median ratio)(Assumed all figures in millions) Outsatnding shares 53 Mkt Cap 1974 EV 2281 Sales 2073.636 EBITDA 380.1667 EBIT 300.1316 Price of a share $37.25/share
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