How is this? What is the best valuation method to use for estimating the (intrin
ID: 2791204 • Letter: H
Question
How is this?
What is the best valuation method to use for estimating the (intrinsic value) of ARMK common stock price, based on the below information? ARMK has seen Annual growth for 2 consecutive years, with annual growth in 2016 of 9.7%. Revenues of $14.42B in 2016, and earnings of $287.81 M. Please provide your rationale for choosing this method. Thanks
Aramark (ARMK)
NYSE - NYSE Delayed Price. Currency in USD
41.32+0.35 (+0.87%)
At close: November 24 1:02PM EST
Summary
Previous Close
40.97
Open
41.13
Bid
0.00 x 0
Ask
0.00 x 0
Day's Range
41.08 - 41.36
52 Week Range
32.87 - 44.12
Volume
279,785
Avg. Volume
1,195,221
Market Cap
10.128B
Beta
0.43
PE Ratio (TTM)
29.94
EPS (TTM)
1.38
Earnings Date
Feb 5, 2018 - Feb 9, 2018
Forward Dividend & Yield
0.42 (1.03%)
Ex-Dividend Date
2017-08-14
1y Target Est
44.60
Previous Close
40.97
Open
41.13
Bid
0.00 x 0
Ask
0.00 x 0
Day's Range
41.08 - 41.36
52 Week Range
32.87 - 44.12
Volume
279,785
Avg. Volume
1,195,221
Explanation / Answer
We find that WRMK's stock market cap is about $ 10.128 B ie it is in the large cap range with revenue of 14.42 B and Eanings of $287 M. So rest assured, the firm is in matured stage of growth with stable cash flows. The PE shows a 29 evidencing a market expectation of future growth. The past growth too has been averaging 10%. As such, with stable cash flows expected in near future, Discounted Cash Flow valuation is the best method one can employ here. As the company seems to be in a mature stage to, a two stage growth model can be employed here( ie Higher growth in the initial five years and then a constant terminal growth rate). After arriving at the DCF value, it can be compared with market comparables to arrive at a formidable range of valuation.
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