Company Valuation Assignment PDF

Running head: COMPANY VALUATION
Company Valuation
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

COMPANY VALUATION1
Executive Summary:
The current report is prepared with the intent to evaluate the financial performance of a public
listed company in Australia. The organisation selected for meeting the purpose of this report is
Flight Centre Travel Group Limited (FLT). The airline industry of Australia has experienced a
steady growth over the past five years. However, the fuel prices have increased drastically over
the years after the global economic recession and as a result, the airfares have increased
considerably. By comparing with the major competitors of the organisation, it has been found out
that Helloworld Travel Limited is placed in a favourable position in the Australian aviation
industry followed by Webjet Limited and Flight Centre Travel Group Limited. The assessment
would also be showing valuation of the business for which computation of Beta and required rate
of return is also shown. The assessment also includes Dividend Discount Model analysis for the
purpose of computing the intrinsic value of the business and make comparison of the same with
the market value of the shares of Flight Centre Travel Group Limited (FLT).

COMPANY VALUATION2
Table of Contents
Part 1................................................................................................................................................3
1.0 Introduction:..........................................................................................................................3
2.0 Recent Financial Performance:..............................................................................................4
3.0 Overtime Financial Performance:..........................................................................................5
4.0 Current Issues:.......................................................................................................................6
4.1 Macroeconomic Factors:.......................................................................................................6
4.2 Microeconomic Factors:........................................................................................................7
5.0 Peer Comparison:...................................................................................................................8
6.1 Du Pont Analysis:................................................................................................................11
Part 2..............................................................................................................................................16
Valuation Analysis of CAPM Approach...................................................................................16
Dividend Discount Model..........................................................................................................18
Difference Between Intrinsic Value and Market Value............................................................20
Appropriateness of Dividend Discount Model..........................................................................21
Sensitivity and Scenario Analysis.............................................................................................22
References:....................................................................................................................................24

COMPANY VALUATION3
Part 1
1.0 Introduction:
The current report is prepared with the intent to evaluate the financial performance of a
public listed company in Australia. The organisation selected for meeting the purpose of this
report is Flight Centre Travel Group Limited (FLT), which is involved in providing retailing and
travel services for corporate, leisure and wholesale travel sectors in Australia, New Zealand,
Africa, USA, Asia and Europe (Flight Centre Travel Group, 2018). Therefore, for evaluating the
financial performance of the organisation, the analyses considered include share price analysis,
ratio analysis and stock price valuation using the dividend discount model.
2.0 Recent Financial Performance:
Figure 1: Share price performance of Flight Centre Travel Group Limited for the years
2014-2018
(Source: Finance.yahoo.com, 2018)

COMPANY VALUATION4
From the above figure, it is evident that the share price of the organisation has started to
decline from 2014 until the first quarter of 2015 and fluctuating trend could be observed over the
years as well. From June to August in the year 2018, the insiders of the organisation have sold
more shares. The individual insiders own 29.84 million shares in the business, which constitute
of 29.52% of the overall number of outstanding shares (Howe, 2018). According to the earnings
expectations of the analysts, an increase of 30.67% is estimated over the next three years and
thus, this denotes a strong outlook for Flight Centre Travel Group Limited. However, this has not
been consistent with the signal that is sent by the company insiders with their net selling activity.
In case of line items, the organisation would experience restrained top-line growth level
over the upcoming year; however, a strong growth in earnings is expected to 10.88% as well.
This might due to sound cost minimisation initiatives that the organisation has undertaken for
driving greater earnings. However, this practice might not be feasible for the long-term and this
might prompt the insiders in reconsidering their shareholdings (Misund, Osmundsen &
Sikveland, 2015). In opposition, they might perceive that the stock has been overvalued by the
market in order to depict favourable selling environment. Moreover, it has been evaluated that
Flight Centre Travel Group Limited has acquired Unmapped, a technology-based organisation in
Canada, on 21st September 2018, due to which decline in stock price could be observed in the
third quarter of 2018.

COMPANY VALUATION5
3.0 Overtime Financial Performance:
Figure 2: Overtime share price performance of Flight Centre Travel Group Limited
(Source: Finance.yahoo.com, 2018)
According to the above figure, it could be observed that the share price of the
organisation has increased from 2000 to 2001 after which a decline could be observed in the year
2002. The reason was that the organisation was going through a massive restructuring stage due
to which decline could be observed in the year. However, the stock price has started to increase
from 2005 to 2009 with significant decline observed in 2009. After 2009, the stock price has
increase until 2014 due to rise in profit level and liquidity. Finally, further increase could be
observed until 2018, as it has successfully acquired a number of organisations due to which its
goodwill has improved. As a result, it has positive impact on the overall share price of the
organisation.