FINC 5530 Module-VII

Seungho Baek
Due: Monday, March 27 2023, 11:59 P.M.

Please make a cover page (name and ID). To submit homeworks electronically, use Blackboard. DO NOT
send me it via email. Please submit your homework in a single excel file. ONLY an excel format of file is
allowed. You have write up with your own words. Do not copy from others’ work. In the last page, you
have to show all your references for your homework. For this project, you must use Bloomberg and Excel.

Part 1 Simple Computation for PE Multiples

Announcing Date Fiscal Period Reported EPS (Actual) Stock Price (Quarter-End) T12M EPS
4/17/2019 Q1 2019 0.972 127.010
7/9/2019 Q2 2019 1.539 131.740
10/3/2019 Q3 2019 1.555 137.930
2/13/2020 Q4 2019 1.452 146.470 ?
4/28/2020 Q1 2020 1.075 136.320 ?
7/13/2020 Q2 2020 1.318 134.910 ?
10/1/2020 Q3 2020 1.664 140.800 ?

Problem 1) Compute trailing EPS for Q4 2019, Q1 2020, Q2 2020, and Q3 2020. (Note: In the above
table, all the reported EPS values are expressed as quarterly ratios. Thus, all the trailing
EPS should be annualized.)1

Problem 2) Using trailing EPS for Q4 2019, Q1 2020, Q2 2020, and Q3 2020, compute the respective
trailing PE multiples.
Problem 3) The following table summarizes the estimated PE, estimated EPS, and estimated trailing
EPS. Compute the forward PE multiple as of 10/1/2020 using the next 12 month estimated
EPS 2

Problem 4) Compare the trading PE and the forward PE on 10/1/2020.

Problem 5) The price for the company on 10/22/2020 is trading at 139.5. Using the trailing PE and
forward PE multiples, identify your target price and discuss whether the price is cheap or
expensive.
1 The trailing EPS (T12M EPS) for 2/13/2020 (Q4 2019) is,
EP SQ1−2019 +EP SQ2−2019 +EP SQ3−2019 +EP SQ4−2019
( 4
)×4
2 The average of the estimated EPS for 10/1/2020 (Q4 20120) EP SQ4−2020 +EP SQ1−2021 +EP SQ2−2021 +EP SQ3−2021
is, 4
)×4

Announcing Date Fiscal Period Estimated EPS T12M Estimated EPS Estimated PE
2/12/2021 Q4 2020 1.455 5.51 25.34
4/28/2021 Q1 2021 1.137 5.57 25.06
7/13/2021 Q2 2021 1.511 5.77 24.20
10/1/2021 Q3 2021 1.705 5.81 24.03

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Part 2 Setting a firm’s target value

Problem 1) Assume that Pepsico Inc. (PEP) released its earning report for the 3Q of 2020. Now you
have selected Pesico’s comparable companies are as below to forecast one quarter ahead (4Q
2020) its fundamental value.

1) Constellation Brand Inc. (STZ)

2) Keurig Dr Pepper Inc (KDP)
3) Monster Beverage Co. (MNST)
4) Molson Coors Beverage Co. (TAP)
5) Coca-Cola co (KO)
6) Boston Beer ’A’ (SAM)
7) Coca-Cola Consolidated INc. (COKE)

Let’s use Bloomberg to collect the respective forecasted EV/EBITDA multiples for the above
companies including Pepsico.

ˆ Enter Ticker
ˆ Press EQUITY (F8) yellow key
ˆ Type EEO
ˆ Select periodicity ”Quarters” and Cur ”USD”
ˆ Press GO green key (Enter)
ˆ Find EV/EBITDA for next 4 Qtrs Est.

Report the respective EV/EBITDA multiples for those companies including Pepsico Inc. and
calculate the average of EV/EBITDA.
Problem 2) Report the following financial values for Pepsico.

1) As of 2020 3Q (9/5/2020), Cash & Equivalents, Preferred & others, Total debt, Enterprise
Value, Market Capitalization.
2) EBITDA (Adj) for 2020 4Q Est (12/31/2020)
To find those values, access to Bloomberg.

ˆ Enter Ticker
ˆ Press EQUITY (F8) yellow key
ˆ Type FA
ˆ Select periodicity ”Quarters” and Cur ”USD”
ˆ Press GO green key (Enter)
ˆ Select Key Stats or B/S to find all the values
ˆ Set Periodicity ”Quarters” and Currency ”USD”
ˆ Press GO green key (Enter)

Problem 3) Calculate estimated enterprise value and market value for 2020 4Q

Problem 4) Compute the target price of Pepsi Co. for the next quarter.

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 Part 3 Regression Method
Let us use the regression approach assuming risk, and growth rate are critical factors to determine a
firm’s PE multiple.To analyze Coca-Cola Co fundamental PE multiple, we college a list of comparable
companies as below:

1) Coca-Cola Bottling
2) Molson Inc. Ltd. ’A’
3) Anheuser-Busch

4) Corby Distilleries Ltd.

5) Chalone Wine Group Ltd.
6) Andres Wines Ltd. ’A’
7) Todhunter Int’l

8) Brown-Forman ’B’
9) Coors (Adolph) ’B’
10) PepsiCo, Inc.

11) Coca-Cola
12) Boston Beer ’A’
13) Whitman Corp.
14) Mondavi (Robert) ’A’

15) Coca-Cola Enterprises

16) Hansen Natural Corp

1) Compute PEG ratio using the below table and the average PEG ratio.

Company Name Trailing PE (PE) Expected Growth (EG) Standard Deviation (SD) PEG
Coca-Cola Bottling 29.33 10.15% 21.13% ?
Molson Inc. Ltd. ’A’ 44.49 16.38% 22.00% ?
Anheuser-Busch 25.22 11.63% 23.57% ?
Corby Distilleries Ltd. 16.35 8.40% 24.32% ?
Chalone Wine Group Ltd. 21.76 14.47% 24.12% ?
Andres Wines Ltd. ’A’ 8.98 3.56% 25.64% ?
Todhunter Int’l 9.35 3.93% 26.11% ?
Brown-Forman ’B’ 10.10 12.25% 30.20% ?
Coors (Adolph) ’B’ 23.81 10.50% 29.85% ?
PepsiCo, Inc. 33.14 11.17% 31.37% ?
Coca-Cola 45.01 19.23% 35.72% ?
Boston Beer ’A’ 11.11 18.10% 40.25% ?
Whitman Corp. 25.21 11.50% 45.01% ?
Mondavi (Robert) ’A’ 16.87 14.85% 45.90% ?
Coca-Cola Enterprises 37.86 27.18% 52.02% ?
Hansen Natural Corp ? 10.03 17.25% 62.51% ?

2) Using the obtained average PEG ratio, compute the respective PE multiples for each company.

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3) Compare the calculated PE multiples and the actual trailing PE multiples and discuss whether each
firm’s value is overvalued or undervalued.
4) Regress of the trailing PE on expected growth and standard deviation,

P E = α + β1 EG + β2 SD

and report α, β1 , β2 , and R2 .

5) Calculate each firm’s estimated PE based the regression model.

Company Name Trailing PE (PE) Expected Growth (EG) Standard Deviation (SD) Pred. PE
Coca-Cola Bottling 29.33 10.15% 21.13% ?
Molson Inc. Ltd. ’A’ 44.49 16.38% 22.00% ?
Anheuser-Busch 25.22 11.63% 23.57% ?
Corby Distilleries Ltd. 16.35 8.40% 24.32% ?
Chalone Wine Group Ltd. 21.76 14.47% 24.12% ?
Andres Wines Ltd. ’A’ 8.98 3.56% 25.64% ?
Todhunter Int’l 9.35 3.93% 26.11% ?
Brown-Forman ’B’ 10.10 12.25% 30.20% ?
Coors (Adolph) ’B’ 23.81 10.50% 29.85% ?
PepsiCo, Inc. 33.14 11.17% 31.37% ?
Coca-Cola 45.01 19.23% 35.72% ?
Boston Beer ’A’ 11.11 18.10% 40.25% ?
Whitman Corp. 25.21 11.50% 45.01% ?
Mondavi (Robert) ’A’ 16.87 14.85% 45.90% ?
Coca-Cola Enterprises 37.86 27.18% 52.02% ?
Hansen Natural Corp ? 10.03 17.25% 62.51% ?

6) Compare the trading PE and the estimated PE. Discuss your findings.
7) Is there any difference in your findings for problem 3 and problem 6?