KMBSolution3 - Kimberly-Clark Corporation(KMB Solution to...

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Kimberly-Clark Corporation (KMB) Solution to Continuing Case, Chapter 3 PRICING MULTIPLES Prices are in the numerator of price multiples, and are calculated as follows: Equity market value = Price per share × Shares outstanding = $64.81 × 482.9 million = $31,296.75 million For unlevered (enterprise) multiples, Enterprise value = Value of the equity + Value of debt = $31,296.25 + $3,661.6 = $34,957.85 See the solution to the Chapter 2 Case for an explanation of these calculations. Here are a number of pricing multiples than can be calculated: P/B ratio = $31,296.25/$6,629.5 = 4.72 = $64.81/$13.73 = $4.72 Enterprise P/B = $34,957.85/$10,291.1 = 3.40 The book value of the enterprise, in the denominator, is Enterprise book value = Equity book value + Net debt = $6,629.5 + $3,661.6 = $10,291.1 Price/Sales = $34,957.85/$15,083.2 = 2.32 (always calculated as an enterprise ratio) Price/ebit = $34,957.85/$2,472.8 = 14.1 (always calculated as an enterprise ratio) (See Ch 2 solution for ebit) Price/ebitda = $34,957.85/$3,273.1 = 10.7 ebitda = ebit + depreciation + amortization = $2,472.8 + 800.3 = $3,273.1
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Where do you find depreciation and amortization? Always in the cash flow section of the cash flow statement. Forward P/E = $64.81/$3.81 = 17.0 (analysts’ consensus eps forecast for 2005 is in the Case for Chapter 1) Trailing P/E = ($64.81 + $1.60)/$3.64 = 18.2 This adjusts for the dividend (appropriately), so is different from that you calculated in the Chapter 2 Case. Do you understand why the dividend is added to the numerator? COMPARABLES Here are the business model statements for PG, GP, and PYX from their 2004 10-K filings. Compare them with the KMB business model that you looked at in the Case for Chapter 1. The Procter & Gamble Company is focused on providing branded products of superior quality and value to improve the lives of the world s consumers. The Company was incorporated in Ohio in 1905, having been built from a business founded in 1837 by William Procter and James Gamble. Today, we market over 300 branded products in more than 160 countries. The Company manages its business in five product segments: Fabric and Home Care; Baby and Family Care; Beauty Care; Health Care; and Snacks and Beverages. None of these segments is highly seasonal. Many of the factors necessary for an understanding of these five segments are similar. Operating margins of the individual segments vary slightly due to nature of the materials and processes used to manufacture the products, the capital intensity of the businesses and differences in selling, general and administrative expenses as a percent of net sales. Net sales growth by segment is also expected to vary slightly due to the underlying growth of the markets of each segments products. For example, we expect the Beauty Care and Health Care segments to provide a disproportionate percentage of overall Company net sales growth, as the market for these products is expected to grow at a higher rate than the remaining segments. The markets in which our products are sold are highly competitive. The products of the
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This note was uploaded on 10/07/2010 for the course ECTCS ec12947322 taught by Professor Johnathayeri during the Spring '10 term at Life.

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KMBSolution3 - Kimberly-Clark Corporation(KMB Solution to...

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