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Transcript of American Greetings
By: Kayla Fink and Ashley Stanford
Greeting Card Publisher
Ownership of Major Brands and Rights to the Characters
Closing Share Price
Assigning an enterprise-value-to-EBITDA ratio of 3.5 times
Enterprise divided by EBITDA
Enterprise value $714M
3.5 EV/EBITDA ratio
American greetings (2014) University of Virginia, VA: Darren Business Publishing
Basic valuation methods. (2015, January 1). Retrieved February 3, 2915, from http://www.unassignment.com/essay-samples/finance/basic-valutation-methods.php
Business valuation: standard approaches and applications (2014) University of Virginia, VA: Darren Business Publishing
Discounted Cash Flows Analysis
How to use DCF to value American Greeting shares
Planning Period: 4 years
Discount Rate: 5.3% (using actual revenue growth)
1/(1+.053)=.81 Discount Factor
Terminal Value: 0.81 DF x $86M=Estimated FCF $69,949,556.70
$75 million repurchase program.
Second largest greeting card company.
How will the market play out?
Should AG repurchase the shares?
Yes the share price is at an 5 year low in Dec 2011 at $12.51 a share while revenue growth was at an 5 year high of 7% anticipated and 5.3% actual. Operating Margins were also at their highest of 9%. This would be a good investment for the company.
Repurchasing shares of the company will also increase the EPS value by decreasing the number of shares outstanding.
Repurchasing shares when share price is undervalued benefits long-term shareholders.