Relative valuation Model Summary 2022

Relative valuation Model
Relative valuation model serves the investors as a tool to determine a target company’s value
and to compare with that of the competitors and justify whether it is undervalued or
overvalued. It provides a certain standard to take an investment decision or evaluate a
company. Here, AMCL is our main concern and it belongs to Food and Allied industry and
we have taken Olympic Industries Ltd, FU-Wang Foods Ltd, Apex Food Ltd and Rangpur
Dairy & Food product limited; as these companies are the main peers and we have conducted
this valuation by using P/E ratio, Normalized P/E ratio, P/BV ratio, PEG ratio and P/Sales
ratio.
Scenario of AMCL
Based on previous years’ data; from 2011 to 2019, AMCL’s revenue had a soaring trend
which started with 1,316,345,576, had a growth of more than double and lastly
ended with 2,821,830,393.
2011 2012 2013 2014 2015 2016 2017 2018 2019
-
50,00,00,000
1,00,00,00,000
1,50,00,00,000
2,00,00,00,000
2,50,00,00,000
3,00,00,00,000
Net Sales movement trend
This graph is presenting a continuous
rise in net sales in the last 9
years.Moreover, EBIT, EBT and Net
profit also had a rising tendency but
the portion of net profit is far less
than the turnover due to incremental
expenses year after year.
Till 2015, it had a smooth net profit
but from the next year, the company
faced little hurdles to continue the
previous standard, again the
condition started to change, appeared with a satisfactory trend.
2011 2012 2013 2014 2015 2016 2017 2018 2019
-
1,00,00,000
2,00,00,000
3,00,00,000
4,00,00,000
5,00,00,000
6,00,00,000
7,00,00,000
Net Profit Movement trend

Trailing P/E ratio provides a proper insight to investors that how much they are willing to pay
and it is solely based on past earnings of the company. On the mirror side, to visualize the
future value of the stock, inventors are tend to use Leading P/E ratio that supports projected
earnings which seems to biased sometimes as the future is uncertain and more to exposed to
unforeseen contingencies.
Currently, the trending
share price is TK 241.50
and EPS of 2019 was
7.30. So the Trailing P/E
ratio and forward P/E
ratio is respectively 33.07
and 31.27.This means
investors will pay TK
33.07 for every one TK
increase in earnings per
share and the share is
trading at 33.07 times
earnings. Again, forward
P/E ratio is calculated to ensure the future growth. Here, we have got the ratio of 31.27 in
2019, which is lower than the current ratio depicts that the investors are expecting higher
earnings in future. Besides, we have got the justified P/E ratio, which is lower than the
forward P/E ratio implies that the stock is overvalued. Normalized P/E ratio considers
cyclical changes in the company’s operation and the impact of it on the operational
performance whilst PEG ratio takes into account the earnings growth rate and here the ratio is
149.42.
Current Price
0
50
100
150
200
250
300
0
P/Bv ratio is 3.04x
The company’s P/BV ratio is 3.04, ROE of 2019 is 9.43% and cost of equity is 9.00%. P/BV
ratio serves the most realistic view of the company’s value. A high P/B and Low ROE is not
1
-
50.00
100.00
150.00
200.00
250.00
300.00
241.50
7.30
Trailing P/E ratio 33.07x

acceptable. Actually, discrepancies between ROE and P/BV gives a negative sign to investors
as an overvalued stock. Here, both ROE and Payout ratio had a declining view, the adjusted
average ROE is 10.82%, adjusted average Payout ratio is 46.37% and adjusted average
growth rate is 5.76%.
Current Price
0
50
100
150
200
250
300
350
400
0
P/Sales ratio 0.68x
However, in 30th June, 2019; Current Sales per share is 352.73, so the P/Sales ratio is 0.68
investors are paying less than one, every increase in sales. Low P/S ratio can be result of
undervaluation or also indicates low level sales.
Scenario of Olympic Industries Ltd
2011 2012 2013 2014 2015 2016 2017 2018 2019
-
2,00,00,00,000
4,00,00,00,000
6,00,00,00,000
8,00,00,00,000
10,00,00,00,000
12,00,00,00,000
14,00,00,00,000
16,00,00,00,000
Sales movement trend
The graph is portraying an uptick trend in the sales of Olympic where in 2016; there was a
peak in sales, though next year it dropped a bit, afterwards the situation changed.

2011 2012 2013 2014 2015 2016 2017 2018 2019
-
20,00,00,000
40,00,00,000
60,00,00,000
80,00,00,000
1,00,00,00,000
1,20,00,00,000
1,40,00,00,000
1,60,00,00,000
1,80,00,00,000
2,00,00,00,000
Net Profit Movement Trend
Over the span of time, net profit also increased coping with revenue. In 2011, it was
256,212,992, during the peak, it was 1,625,663,229 and at last the amount was
1,871,821,560. This company gives dividend both in stock and in cash and the number of
outstanding shares is volatile. In 2019, the number of outstanding share is 199,938,886.
The market price of the stock is 236.30
and Trailing P/E Ratio is 25.24 means
Investors paid TK 25.24 per
earnings;whilst the Leading P/E ratio is
20.77 which is lower than the trailing P/
E ratiomeans they are expecting higher
earnings from the company in future.
Again, Normalized P/E Ratio is 15.97
and the PEG Ratio is74.14. PEG ratio
considers earnings growth rate and
provides a proper guidance.
During these 9 years, the company
experienced a severe volatility in ROE
and it reduced significantly. The highest ROE was 75.37% which was in 2015. In 2019,
Olympics’ ROE was 27.69% while the average ROE was 45.60%, Dividend payout ratio
51.27%, Growth Rate was 13.49% and adjusted average growth rate was 21.54%.
P/BV ratio compares the market
value to book value. Here, market
share price represents the market
value. High P/BV means the stock
is overvalued.
1
-
50.00
100.00
150.00
200.00
250.00 236.30
9.36
Trailing P/E ratio is 25.24x
Current Price EPS
Current Price
0
50
100
150
200
250
0
P/Bv RAtio is 6.55x