1、邀您加入【干貨群】 、【CPA群】、【CFA群】、【人脈群】，回復“ 13 ”入群學人、考證資料、必備書籍等持續更新關注深度行業報告、華爾街、The Goldman Sachs Group, Inc.Equity Valuation Understanding whats importantNovember 2009Helen Jewell, CFA44-20-7552-9454helen.jewell We are going to consider three of the most popular and effective valuation toolsReturns based an

2、alysis Multiple AnalysisDCF For each of them we are going to look at:How they workWhy some work better than others, and.Why they are all simply different ways of looking at the same thingGoldman Sachs Global Investment Research2IntroductionReturns Based AnalysisExcess value created by aActual Return

3、 versusRequired ReturnCROCIcompanyWACCTotal EVGross Cash InvestedFor Directors Cut, but can adjustExcess value attributed byActual Value versus Invested Valuethe marketIf these are out of line, the stock is misvaluedGoldman Sachs Global Investment Research4VersusKey IdeaIts all about the value-added

4、You invest $100m in some assets Your required return is 10%The actual return is 10%The actual return is 20%The actual return is 5%The investmentshould be worthThe investmentshould be worthThe investmentshould be worth$100m$200m$50mEVCROCIEVCROCIEVCROCIGCIWACCGCIWACCGCIWACCGoldman Sachs Global Invest

5、ment Research5Value DestroyingValue CreatingWhy Does it Work?Operating cash flow (ignoring Working Capital) plus after-tax interest and leaseNon-cash items and the companysfinave no impact,making comparisons more meaningfulInterest and Lease x (1 Tax Rate)CROCI =Debt-Adjusted Cash FlowGross Cash Inv

6、estedPre-depreciation and write off value of tangible and intangible assetsGross Assets plus Operating working capital plus capitalised leases plus investmentsDepreciation policies do not impact this figureGoldman Sachs Global Investment Research6Calculating CROCI1:1 line2.0OvervaluedLine representi

7、ng average valuation for the sector1.5Question: Why are these different?1.0DC score > 1DC score < 10.5Undervalued0.00.51.01.5CROCI/WACCQuartile 22.02.5Quartile 4Quartile 3Quartile 1EV / GCIGoldman Sachs Global Investment Research7Companiesarecomparedwiththesector Capex Valuable assets which ar

8、e not revalued (eg. Intangibles) Growth. Absolute growth is not the driver of value Why? Growth isnt always good Returns, not growth, have historically been shown to drive valuations Returns are more stable and consistent than growthGoldman Sachs Global Investment Research9What about growth? If mana

9、gement are generating lower returns than required returns, then value will be destroyed If management are generating higher returns than required returns, then value will be addedPrice DownPrice UPPrice StableReturn < Required returnReturn = Required returnReturn > Required returnGrowthGrowthH

10、ighLowLowHighGoldman Sachs Global Investment Research10Value AddingValue NeutralValue DestroyerGrowthisntalwaysgood!Directors Cut shows the highest correlation with market valuation over time in AEJas well as in Japan70%70%60%60%50%50%40%40%30%30%20%20%10%10%0%0%EV/EBITDA vs.Next year EBITDA growthD

11、iv Yield vs.Next year DPS growthPE vs.Next year EPS growthEV/GCI vs. CROCI/WACCDiv Yield vs.Next year DPS growthPE vs.Next year EPS growthEV/EBITDA vs.Next year EBITDA growthEV/GCI vs. CROCI/WACCSource: Goldman Sachs Research estimates, Gao Hua Securities Research estimates.The market values compani

12、es on returns: The correlation between capitalization ofcash invested (EV vs. GCI) and economic return spsignificantly higher than between multiples and growth(CROCI vs. WACC) isR2 across sectors 2000-2008 averageR2 across sectors 2000-2008 averageGoldman Sachs Global Investment Research11Cashreturn

13、 sps, not growth, drivevaluation and performanceTop-quartile returns more sustainable than growth in AEJas well as in Japan80%90%Average years first quartile position is sustained:CROCI: 2.4 yearsGrowth: 1.3 yearsAverage years first quartile position is sustained:CROCI: 2.8 yearsGrowth: 1.2 years70%

14、80%70%60%More than 95% of companies display first quartile growth for 2 years or less. Approx. 85% do not make it past 1 yearAbout 95% of companies display first quartile growth for 2 years or less. Approx. 80% do not make it past 1 year60%50%50%40%40%30%CROCI is much more sustainable, with approx.

15、30% of companies that ever returned a top quartile CROCI, holding the position for longer than 3 consecutive years30%CROCI is much more sustainable, with more than 35% of companies that ever returned a top quartile CROCI, holding the position for 3 consecutive years and longer20%20%10%10%0%0%1234567

16、8910111213141234567891011121314Number of consecutive years in first quartileNumber of consecutive years in first quartileFirst quartile CROCIFirst quartile GrowthFirst quartile CROCIFirst quartile GrowthSource: Company data, Goldman Sachs Research estimates, Gao Hua Securities Research estimates.And

17、 understanding the sustainability of returns is critical for valuationPercentage of companies (at least one year in the top-quartile)Percentage of companies (at least one year in the top-quartile)Goldman Sachs Global Investment Research12Superior returns are more sustainablethan superior growth Comp

18、anies who have Q1 CROCI and who can sustain this level of CROCI will be ascribed a premium by the market (they may appear to be overvalued but they are not). The size of the premium depends on how long they will stay as a Q1 CROCI stock Companies who move into Q1 CROCI but for who the market does no

19、t believe this to be sustainable will not re-rate (they may appear to be undervalued but they are not) Companies which are Q4 have a floor valuation and so trade at a premium to the line. The size of the premium depends on whether they are a sustained loser or notGoldman Sachs Global Investment Rese

20、arch13Taking the methodology one step further understanding the behaviour of Q1 and Q4 CROCI companiesSustainable leaders:Valuation premium increases over time, up to c.10% premiumUnsustainable leaders:Trade at a c.10%valuation discountUnsustaineddisadvantage:Trade at a c.20% premiumSustainedQuartil

21、e 4Quartile 1disadvantage:CROCI/WACCTrade at a c.5%premiumSource: Goldman Sachs Research estimatesEV/GCIAverage premium/(discount) ascribed to stocks sustaining top-quartile CROCI for 1-6 years20%Similar to our analysis in Europe, we find that 4 years of return sustainability is the key. There is a

22、valuation premium for companies sustaining top-quartile CROCI for 4 years or more and a valuation discount for companies sustaining top quartile CROCI for 3 years or less15%243910%565%0%12345682-5%-10%141Number of companies 260-15%-20%Number of consecutive years in first quartileSource: Goldman Sach

23、s Research.Valuation Premium/Discount to sector avg EV/GCI vs. CROCI/WACCGoldman Sachs Global Investment Research15Industry Leaders: Sustained advantage greater than four years is reflected in the valuation premiumAverage premium/(discount) ascribed to stocks sustaining bottom-quartile CROCI for 1-6

24、 years25%20%504WHY?209Number of companies15%10%1015%560%30123456-5%15-10%-15%Number of consecutive years in fourth quartileSource: Goldman Sachs Research.Valuation Premium/Discount to sector avg EV/GCI vs. CROCI/WACCGoldman Sachs Global Investment Research16Industry Laggards: Sustained disadvantage

25、leads to a lower valuation premium, which disappears after 4 yearsContinuous fourth-quartile CROCI companies find a floor at about 0.34X sector relative EV/GCIin AEJand 0.27X in Japan0.60x0.60x0.55x0.55x0.50x0.50x0.45x0.45x0.40x0.40x0.35x0.35x0.30x 0.30x0.25x0.25x0.20x0.20x12345678123456789Number of

26、 years in fourth quartileNumber of years in fourth quartileSource: Goldman Sachs Research.While CROCI may trend towards zero (or negative), enterprise values are unlikely toconverge towards zero due to potential for sale or break-up, hence sustained laggards find aSector Relative EV/GCISector Relati

27、ve EV/GCIGoldman Sachs Global Investment Research17Sustained laggards tend to revert to an asset- based valuationGS SUSTAIN identifies companies which stand out for their superior performance in each of the drivers of corporate performance: Return on capital Industry positioningIdentified by looking

28、 at CROCI quartileIdentified in collaboration with teamsUsing our ESG framework Management quality with respect to ESG issuesGS SUSTAIN focus list performance YTDPositive alpha generated each year on both the long and the short legsThe Directors Cut basic methodology generated 47%long/short performa

29、nce in Asia oage (2000-2008)Longs (relative)Shorts (relative)75%40%Longs (relative) averageShorts (relative) average35%60%30%25%45%20%30%15%10%15%5%0%0%Source: Goldman Sachs Research. 2009 corresponds to annualized ytd performance.Significant alpha generated by selecting top and bottom 20% of stocks

30、 - Portfolio rebalanced every monthBoth in AEJ and Japan, the backtest shows strong alpha (46% and 34% p.a. in AEJ and Japan respectively) Methodology is based on a companys cash flow over the next 12 months Stocks with strong cash flow returns over medium term may screen as expensive Stocks with de

31、teriorating cash flow returns over medium term may screen as cheapTRG team in Asia have increased the time horizon to 2 years and 3 yearsIncreasing the time horizon to 2 years translates into small alpha gain for AEJ, and alpha reduction for Japan (and assumes perfect foresight)Increasing the time h

32、orizon to 3 years generates consistently lower alphaDifferent time horizons work in different periods Generally, methodology based on one year forward is better, except when markets peak when a 3 year forward works bestWe use the same WACC across sectors. Why?. Spending time forecasting numbers is c

33、ritical In the recent downturn, analysts forecasted revenue well, but missed working capital and operating leverage, meaning that actual returns (especially on a cash basis) were overstated Understanding industry concentration also critical work by SUSTAIN team shows that more consolidated sectors y

34、ield higher average cash returns and industry stability supports higher average returnsGoldman Sachs Global Investment Research21Methodology is only ever as good as your numbers+50%+50%Reverse in a downturn!+100%+200% The most simple way to calculate WC is as a % salesSalesSales growthWC % Sales WC1

35、,0001,10010.0%5%5551,21010.0%5%6161,3007.4%5%6551,200-7.7%5%60(5)Note that working capital is forecast from sales and change in working capital is subsequently calculated.5%50Change inChange in as % SalesWCWC0.45%0.45%0.35%-0.42% However, this assumes that if sales fall, the working capital requirem

36、ent is positive. It also does not allow analysis of the various components of working capital and how they are movingCould use salesInventory Turnover =COGSInventory Holding = Period365Av InventoryInventory TurnoverReceivables Turnover =SalesReceivables Collection Period=365Av ReceivablesReceivables

37、 TurnoverPayables Turnover =SalesPayables Payment Period=365Av PayablesPayables TurnoverAnalyse trend in these to forecast working capital driversGoldman Sachs Global Investment Research24Calculating Working Capital using the Cash Conversion CycleInventory turnover Inventory days Receivables turnove

38、r Receivable days Payable turnoverPayable days23.715.444.08.312.030.424.115.243.18.513.626.920.218.139.59.212.928.420.218.139.59.212.928.420.218.139.59.212.928.420.118.139.59.212.928.420.118.139.59.212.928.4 Look at the trends in each of the components to drive the calculation of the balance sheet i

39、tem Easier to understand and analyse than simple percentage numbers Allows working capital to be analysed and any anomalies to be spotted Can also look at trends in the cash conversion cycle.Goldman Sachs Global Investment Research25Balance Sheet (GBP mn)2005200620072008E2009E 2010E2011ECalculating

40、Working Capital using the Cash Conversion CycleIs it increasing in the current climate?Receivables Collection PeriodHow does it compare to other companies?Inventory Holding Period$ inSell$ outPayables Payment PeriodIs the company able to negotiatepayment terms withFunding gap needs to be filled! Lik

41、ely to get bigger (and more expensive to fill) during a downturnrs?CROCI=DACF=RevenuexEBITDAxDACFGCIGCIRevenueEBITDACash conversionAsset turnoverOperating marginHigher the operating leverage greater the sensitivity of EBITDA to changes in revenueGoldman Sachs Global Investment Research27Deconstructi

42、ngCROCI You are given the following information about a stock. Assu 1:1, what is the target price?that the sector EV/GCI vs CROCI/WACC isCash & equivalents Stockss receivable Other current assetsCurrent assets27.0480.3300.6571.21,379.1Sales8,728.7Operating costs (COGS & SG&A) Other opera

43、ting income/(expense) EBITDAEBITDA (analyst) (GBP)(8,000.5)340.61,068.81,068.8s payable Other current liabilitiesCurrent liabilities(933.5)(435.2)(1,368.7)DepreciationOperating income (EBIT)(369.4)699.4Net interest expensePre-tax profitPre-tax profit (analyst) (GBP)(121.3)578.1578.1Gross fixed asset

44、s Accumulated depreciationNet fixed assets9,027.0(3,582.4)5,444.6Gross intangible assets Accumulated amortizationNet intangible assets305.50.0305.5Effective tax rate Provision for income taxes Net income28.0%(161.9)416.2Total net depreciating assets5,750.1(increase)/decrease in working capital(27.6)

45、Weighted shares outstanding (mn) Net debtMinority interestsUnfunded pensions and other provisions1,586.02,532.27.3769.4Operating working capital10.4WACC7.1%Operating Cash Flow = Net Income + Depreciation increase in working capital= £416.2m + £369.4m - £27.6m = £758mDACF = Operat

46、ing Cash Flow + Interest x (1 Taxrate)= £758m + £121.3m x (1 28%) = £845.3mGCI = Gross fixed assets + Gross intangible assets + Operating working capital= £9,027.0m + £305.5m + £10.4m = £9,342.9mCROCI = DACF/GCI = 845.3/9,342.9 = 9.05%CROCI/WACC = 9.05%/7.1% = 1.27

47、43Enterprise Value = 1.27 x GCI = 1.2743 x £9,342.9m =£11,906mEquity Value = Enterprise Value Net Debt Minority Interests Unfunded Pensions= £11,906m - £2,532.2m - £7.3m - £769.4m =£8,597mTarget price per share = £8,597m/1,586m =£5.42 We have focussed on

48、the Directors Cut concept of CROCI. However, the concept of comparing excess value generated to excess value placed on the stocks by the market can be applied to different metrics Critical thing is to be consistent, and be aware of any issues. Both CROCI (Cash Return on Cash Invested) and ROIC (Retu

49、rn on Invested Capital) measure the return that a company is generating and so are useful valuation metrics Remember to be consistent.Gross Cash Invested = Gross Value of Assets (plus investments and working capital)Invested Capital= Net Book Value of AssetsEVEVICGCICash Return on Cash Invested= DAC

50、FReturn on Invested Capital= NOPLATICGCIROICCROCI Key difference between CROCI and ROIC is in the asset valuation ROIC uses measureing figures whereas CROCI is a cash basedOperating Cash Flow + Interest x (1 tax rate) ie. Pre depreciation and provisionsEBIT x (1 tax rate) ie. Post depreciation and p

51、rovisionsNOPLATICDACFGCIROIC =CROCI =NBV of Assets ie. Post depreciation and provisionsGross Value of Assets ie. Pre depreciation and provisions Whilst the impact of depreciation normally cancels out, provisions can cause distortions in ROIC which do not affect the CROCI number.Assume that a company

52、 is being analysed over a three year period. EBIT and GCI isconstant. The company has an EV of 12,000. There are no taxes or interest.CROCI remains constant (as does GCI) and ROIC increases in line withCROCI remains constant but ROIC is distorted by the provision in year 1. If the provision was reversed, this would create further distortionTherefore, analysing returns on a cash basis will give a better indication of future performance than looking ating returns.Goldman Sachs Global Investment Research33Year 1Year 2Year 3GCI10,00010,00010,000Depreciation1,0001,0001,000IC9,00