nike inc. stock pitch
TRANSCRIPT
1
Nike Inc. Stock Pitch
NYSE: NKE – BUY at $51.10 USD 0.49 (0.95%)
November 26, 2016
Anwar KhanWaseem Manan
Manar Agha
2
-0.1%
-24 %
-5.1%
$65
$75
$85
$95
$105
$115
Nov-15 Feb-16 May-16 Aug-16 Nov-16
Price remains near 52 Week Low
S&P500 NKE S&P500 Consumer Discretionary
⎻ Nike, Inc. designs, develops, markets and sells athletic apparel, footwear and accessories to towards men, women and children worldwide
⎻ Nike has a very experienced senior management team with over a 100 years of combined experience whose continued push into product innovation has helped it to differentiate itself from competitors
⎻ There are seven key product categories in the NIKE and Jordan brands : Running, Basketball, Football, Men and Women’s training, NIKE sportswear and action sports
⎻ Nike has strong associations with it’s products and world class athletes, building a considerable moat around it’s brand
Company Overview
Overview of Nike Inc.
Source : Bloomberg, FactSet, Nike’s 10K, Thomson One Analytics
52 Week Performance
Management Subsidiaries
⎻ With more than 30 years of experience at Nike, Parker helps lead the
growth of the Nike brand and industry-breakthroughs in product
design.
Mark Parker: Chairman, President and CEO, Nike, Inc.
⎻ After joining the company in 1992, Edwards is responsible for leading
all category and geographic business units.
Trevor Edwards: President, Nike Brand
⎻ Previous to joining Nike, Campion held leadership roles at Walt
Disney Company. Starting 2007, he led all aspects of Financial
Management for Nike’s flagship brands.
Andy Campion: EVP, Chief Financial Officer
⎻ Hurley is an American multinational corporation that
specializes in marketing and selling of surf apparel and
accessories. It was acquired by Nike in 2002.
⎻ Jordan Brand designs and produces basketball
footwear and athletic clothing under Nike, and is
endorsed by the 6 time NBA Champion, Michael Jordan.
⎻ Converse, Inc. manufactures and designs athletic
footwear and apparel. Its products are sold
through more than 12,000 retailers.
3
⎻ Leading innovator in footwear and performance apparel
⎻ Recently announced Nike Hyperadapt 1.0, performance footwear with adaptive lacing for a proper comfort and fit
⎻ NIKE+ leads connectivity and engagement in a growing wearable market, provides access to Nike services, including customizable footwear and apparel recommendations, guided workouts and motivational music mixes
⎻ Other leading innovations include, Nike Anti-Clog Technology, Nike Flyknight, Air VaporMax, AeroSwift
Core Business
Nike Innovation, 2016 Product Line
Source : Bloomberg, FactSet, Nike’s 10K, Thomson One Analytics
Product Innovation in Track & Field, Football & Basketball
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
United
States
China Germany Canada United
Kingdom
France Japan RoW
Lots of room to diversify across multiple geographies
61%
28%
5%6%
Footwear and Apparel make up 89% of the revenues
Footwear
Apparel
Accessories
Other
Segmented Revenue Geographical Revenue Breakdown
Total LTM
Revenue
$33B
4
4.5
4.6
4.7
4.8
4.9
5.0
5.1
Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16
Un
em
plo
yme
nt
Ra
te %
Source: U.S. Bureau of Labor Statistics
Macro Outlook
U.S Unemployment Rate remains low in 2016
Source : IBIS World Industry Research, U.S Bureau of Labor Statistics, FRED, World Bank, McKinsey Analysis
$
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
'05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
Dis
po
sa
ble
In
co
me
Source: FRED, NKE 10K
Real Disposable Income (bn, left)
NKE's Annual Revenue (mm, right)
China’s Structural Transition to ConsumptionU.S Disposable Income peaking post ’08 recession
1015 17
22 20
12
1213
15 21
3
4
4
3
3
10
109
11
11
5
77
5
5
7
67
8
8
8
11
10
11
13
44
3633
24
18
2005 2010 2013 2020 2030
Discretionary Household Products Necessities
Food
Apparel
Healthcare
Household products
Housing & Utilities
Personal Items
Recreation, Education
& Culture
Transportation &
Communication
CAGR
2013-30
5.3
6.5
7.6
Per-household annual consumption in China by category, %
5
⎻ Globally, the market for sports apparel and footwear is estimated to be worth $350 billion in sales, jumping 42% in the past 7 years
⎻ Global footwear (including performance, outdoor and sports-inspired) is projected to grow at an annualized rate of 7.3%
⎻ The sports industry (ticket, media and advertising revenue) is growing faster than GDP both in fast-growing economies (BRIC) and in more mature markets in Europe and North America
⎻ Increase in life expectancy (aging baby boomers) and increase in health awareness are leading towards an increase in exercise within developing and emerging markets, leading to an expected 6% CAGR growth of Sports Apparel over 2015-2020
Industry Outlook
Industry Overview
Global Sports Apparel by Type: Absolute Value Growth and % CAGR 2015-2020
Global Sports Footwear by Type: Absolute Value Growth and % CAGR 2015-2020
Source : IBIS World Industry Research, Euromonitor International, Morgan Stanley, AT Kearney
0%
1%
2%
3%
4%
5%
0
5,000
10,000
15,000
20,000
Performance
Apparel
Outdoor Apparel Sports-Inspired
Apparel
CA
GR
20
15
-20
20
US
$ m
illio
n
Absolute Value Growth (US$ million) 2015-2020 % CAGR 2015-2020
0%
2%
4%
6%
8%
10%
0
5,000
10,000
15,000
20,000
Performance
Footwear
Outdoor Footwear Sports-Inspired
Footwear
CA
GR
20
15
-20
20
US
$ m
illio
n
Absolute Value Growth (US$ million) 2015-2020 % CAGR 2015-2020
15%
20%
25%
30%
35%
40%
45%
1980 1985 1990 1995 2000 2005 2010 2015
Pa
rtic
ipa
tio
n R
ate
Boys Total Girls
High School Sports Participation Rate
6Investment Thesis
⎻ Cash on Hand: Currently, Nike has approximately $5.46B in cash on its balance sheet. Management has indicated that this could be used for acquisitions to further diversify its product offerings or for increased investments in R&D/”Demand Creation”.
⎻ Free Cash Flow Generation: Nike has maintained Free Cash Flow generation throughout the last five years at an annual CAGR of 22%. In addition, Cash Returned on Assets has averaged a CAGR of 17%.
⎻ Share repurchases: Nike announced 12B Share Repurchase Program in Q4 2015. The current Share Repurchase program of 8B is expected to complete by the end of 2016.
⎻ Dividend Increases: Nike plans to maintain a dividend payout range of 25%-35%. On November 19, 2015, it announced a 14% increase in its split-adjusted quarterly dividend, to $0.16. FCF Yield also remains well above 3.5%.
Nike is well poised for potential M&A activity while maintaining dividend/share repurchase programs in the near future.
Source : Morgan Stanley, Euromonitor International, Nike’s 10K, McKinsey Analysis
Strong Financial Position DTC Growth Strategy
Nike is the fastest growing DTC business with the lowest P/E Multiple
⎻ Nike forecasts DTC Sales to grow $16B by 2020
⎻ DTC channel offers Nike the potential to customize customer orders with 3D printing, while collecting valuable consumer data
⎻ DTC strategy expected to add 0.3-0.5 % pts on gross margin each year, strongly outpacing margin improvements by competitors
⎻ Online sales further enhance DTC strategy, while Nike’s e-commerce sales grew 55% YoY to $1.2B in fiscal year 2015, making up 3.9% of total yearly revenues
Nike’s DTC Strategy spearheaded by investment in E-Commerce will proliferate its growth over the coming years as the company benefits from access to Global Markets.
0.0%
5.0%
10.0%
15.0%
NIKE B Median adidas PUMA Under Armour
A
Superior Margin Efficiency against Competitors
EBIT Margin EBIT Margin NTM Net Margin Net Margin NTM
407
392
376
362
339
322
815
761
707
683
592
536
2019E
2018E
2017E
2016
2015
2014
Total Store Counts, projected 42% growth
by 2019Domestic
Stores
International
Stores
$
$1
$2
$3
$4
$5
$6
$7
$8
$9
$10
%
5%
10%
15%
20%
25%
LULU UA ADS NKE
DTC
Re
ven
ue
($
, b
n)
DTC Comparison
23 P/E
27 P/E
53 P/E
27 P/E
DTC Revenue
TTM Comp
(inc. E-com)
7Valuation I : Comparable Companies Analysis
Source : Bloomberg, FactSet, Capital IQ, Thompson One, Nike 10K, NASDAQ
EV/EBITDA Price / Earnings Net Debt/
EBITDA
Historical Diluted EPS
Growth (%)
EBITDA
MarginFree
Cash Flow
Yield
Dividend
YieldCompany Name Fiscal Period Market Value Enterprise
ValueLTM FY1 FY2 FY1 FY2 1Yr 3Yr FY1
NIKE B 05/31/2016 82,626.3 79,898.3 17.91x 14.54x 12.48x 20.94x 18.45x -0.61x 12.41 64.16 15.8% 2.03% 1.12%
Average 11,941.8 12,235.9 15.23x 13.29x 11.46x 29.34x 24.26x -0.33x 10.95 114.57 13.1% 1.74% 0.94%
Median 7,985.8 7,652.6 14.37x 13.20x 11.50x 24.11x 21.07x -0.68x 11.49 25.54 12.82% 2.11% 0.76%
Footwear
adidas 06/30/2016 33,987.1 35,110.3 16.24x 16.81x 14.82x 29.97x 26.18x 0.53x 79.57 49.57 9.7% 3.57% 1.78%
PUMA 06/30/2016 3,751.0 3,502.8 25.74x 16.65x 12.85x 57.72x 37.43x -1.87x -12.70 -2.67 5.1% -3.11% 0.25%
SKECHERS USA A 06/30/2016 3,271.0 2,782.5 6.34x 6.06x 5.45x 12.55x 11.63x -1.27x 26.96 808.79 12.5% 2.45% 0.00%
VF 07/02/2016 22,404.1 24,536.6 12.51x 11.83x 10.75x 17.25x 15.79x 1.09x 19.23 14.37 16.6% 3.32% 2.14%
Apparel
Under Armour A 06/30/2016 12,246.7 13,140.6 24.49x 21.37x 18.21x 50.89x 44.13x 1.67x -7.58 36.70 12.2% -1.93% 0.00%
Ralph Lauren A 07/02/2016 8,117.5 7,986.5 7.55x 8.19x 7.78x 18.17x 16.77x -0.12x -46.90 -54.29 14.4% 7.11% 2.07%
Lululemon Athletica 07/31/2016 7,854.2 7,318.8 16.85x 14.56x 12.25x 26.95x 22.90x -1.23x 3.74 4.86 21.2% 1.78% 0.00%
Columbia Sportswear 06/30/2016 3,902.9 3,509.2 12.13x 10.83x 9.58x 21.27x 19.24x -1.42x 25.31 59.24 13.1% 0.73% 1.27%
Comparable Companies Analysis
Commentary Broker Outlook
$56$58$60$62$64$66$68$70$72$74
%
%20
%40
%60
%80
%100
Underweight + Sell Rating Buy + Overweight Rating
Hold Rating Target Price
⎼ Nike has one of the largest dividend yields amongst its comparable at 1.12%
⎼ Nike trades in line with industry median EV/EBITDA multiples and at a discount in P/E multiples
⎼ We expect NKE to grow LT gross margins, through cost reductions, pricing power and DTC expansion
⎼ We believe NKE’s growth opportunities in emerging economies are underestimated by analyst forecasts for FY2017 and FY2018
8Valuation II : Discounted Cash Flow Analysis
Source : Bloomberg, FactSet, Capital IQ, Thompson One, Nike 10K, NASDAQ
Discounted Cash Flow - Inputs & Assumptions
Enterprise Value Calculation (Exit Multiple)
Cumulative Present Value of FCF $11,325.0
Terminal Value
Terminal Year EBITDA
(2022E)$6,384.4
Exit Multiple 19.5x
Terminal Value $124,444.0
Discount Factor 0.72
Present Value of Terminal Value $89,142.7
% of Enterprise Value 88.7%
Enterprise Value $112,122.0
Implied Equity Value and Share Price (Exit Multiple)
Enterprise Value $100,467.7
Less: Total Debt(2,059.0)
Less: Preferred Securities -
Less: Non-controlling Interest -
Plus: Cash and Cash Equivalents 4,787.0
Implied Equity Value $103,195.7
Shares Outstanding 1,721.0
Implied Share Price $59.9
DCF Perpetuity Growth Method
Perpetuity Growth Rate 4.04%
2022 FCF3,493.7
Terminal Value 87,397.7
Present value of FCF 11,325.0
Enterprise Value 98,722.7
Less : Total Debt (2,059.0)
Less : Non-controlling Interest -
Plus : Cash and Cash
Equivalents4,787.0
Equity Value 101,450.7
Shares Outstanding 1,721.0
Implied DCF Share Price $58.9
Weighted Average Cost of Capital Calculation
Capital Structure
Debt-to-Total Capitalization 2.1%
Equity-to-Total Capitalization97.9%
Cost of Debt
Cost of Debt 2.3%
Tax Rate14.1%
After-tax Cost of Debt 2.0%
Cost of Equity
Risk-free Rate(1) 2.3%
Market Risk Premium(2) 6.9%
Levered Beta 0.68
Cost of Equity 7.0%
WACC 6.9%
Historical Period CAGR LTM Projection Period CAGR
2014 2015 2016 ('14 - '16) 2017 2018 2019 2020 2021 2022 ('18 - '22)
Sales $27,785.0 $30,696.0 $32,464.0 8.1% $33,035.0 $36,999.2 $39,959.1 $44,354.6 $48,790.1 $53,181.2 10.0%
% growth NA 10.5% 5.8% 1.8% 12.0% 8.0% 11.0% 10.0% 9.0%
COGS 15,341.0 16,754.0 17,991.0 18,454.0 20,719.6 22,377.1 24,838.6 27,322.5 29,781.5
Gross Profit $12,444.0 $13,942.0 $14,473.0 7.8% $14,581.0 $16,279.6 $17,582.0 $19,516.0 $21,467.6 $23,399.7 9.9%
% margin 44.8% 45.4% 44.6% 44.1% 44.0% 44.0% 44.0% 44.0% 44.0%
SG&A 8,766.0 9,892.0 10,469.0 10,789.0 11,839.7 12,786.9 14,193.5 15,612.8 17,018.0
EBITDA $3,678.0 $4,050.0 $4,004.0 4.3% $3,792.0 $4,439.9 $4,795.1 $5,322.6 $5,854.8 $6,381.7 11.0%
% margin 13.2% 13.2% 12.3% 11.5% 12.0% 12.0% 12.0% 12.0% 12.0%
Depreciation & Amortization 518.0 606.0 649.0 668.0 740.0 799.2 887.1 975.8 1,063.6
EBIT $3,160.0 $3,444.0 $3,355.0 3.0% $3,124.0 $3,699.9 $3,995.9 $4,435.5 $4,879.0 $5,318.1 11.2%
% margin 11.4% 11.2% 10.3% 9.5% 10.0% 10.0% 10.0% 10.0% 10.0%
Taxes 445.6 485.6 473.1 440.5 521.7 563.4 625.4 687.9 749.9
EBIAT $2,714.4 $2,958.4 $2,881.9 3.0% $2,683.5 $3,178.2 $3,432.5 $3,810.1 $4,191.1 $4,568.3 11.2%
Plus: Depreciation & Amortization 518.0 606.0 649.0 668.0 740.0 799.2 887.1 975.8 1,063.6
Less: Capital Expenditures (880.0) (963.0) (1,143.0) (1,093.0) (1,110.0) (1,198.8) (1,330.6) (1,463.7) (1,595.4)
Less: Increase in Net Working Capital (712.8) (412.1) (611.9) (617.5) (611.3)
Unlevered Free Cash Flow $2,095.5 $2,620.8 $2,754.6 $3,085.7 $3,425.2
WACC 6.9%
Discount Period 1.0 2.0 3.0 4.0 5.0
Discount Factor 0.94 0.88 0.82 0.77 0.72
Present Value of Free Cash Flow $1,960.2 $2,293.4 $2,254.9 $2,362.9 $2,453.5
9
$0.0
$15,000.0
$30,000.0
$45,000.0
$60,000.0
$75,000.0
$90,000.0
2% 4% 6% 8% 10%
Ab
so
lute
Va
lue
Gro
wth
(U
S$
Mm
)
CAGR 2015-20
Dynamic Growth Countries to 2020Absolute Value Growth vs. 2015-20 CAGR
Catalysts
China as Top Priority
⎻ China expected to contribute US$77B by 2020, while India is on pace with a CAGR of 7% to achieve growth of US$26B
⎻ The number of marathons in China have doubled and viewership of basketball has nearly tripled since 2015
⎻ Aging demographics have lead to higher gym membership enrolment, growing at an estimated CAGR of 2.3% in China and 7.1% in India until 2020
If Nike increases presence in China while tapping into women’s apparel, Nike will continue to see more room for growth alongside its expanding DTC Strategy.
Source : Morgan Stanley, Euromonitor International, Nike’s 10K, McKinsey Analysis
Emerging Fashion Future Hotspots Opportunity in Womenswear
45
63
74
55
37
26
2025
2010
2004
Women's Apparel
Market SizePercent of Sales
3.3
4.8
2004-10 2010-25
Women’s Apparel Market
GrowthCAGR, percent
45%
Midmarket
Luxury
72
86
93
28
14
7
2025
2010
2004
Growth in Female Fashion and Performance Gear
⎻ Boom in running and women’s training increased the demand for functional but fashionable products.
⎻ Recent openings of women’s only stores in Newport Beach, California and Shanghai aim to tap into this trend. Nike aims to have 1,000 premium spaces dedicated to women by 2020, both within it’s own stores and sports retailers.
Nike is well positioned to exploit the strong growing trend in womenswear, as men’s apparel and footwear products become saturated.
China
Vietnam
India
Saudi Arabia
Columbia
Mexico
Romania
UAE
Mature
Markets
International
Markets
10Risks
Increasing Inventory
⎻ Due to decreased consumer spending and high industry inventory levels, Nike is subject to significantly high order flows and over-filled supply channels. Looking forward, Nike plans to adjust inventory levels, bring better innovation, and drive stronger sell-through to customers.
FX Fluctuations
⎻ Sales have been hurt by economic weakness in Europe. Since Nike is nearly 60% international, its global portfolio is diverse enough to withstand weakness in any individual market. However, unanticipated swings in FX rates create risks to Nike’s EPS.
Emerging Competitors
⎻ Under Armour could continue to take share in the kids demographic, potentially taking loyal long-term customers away from Nike. In addition, Adidas’s pipeline of new products may gradually gain share from Nike.
Failure to Maintain High-Quality Endorsers
⎻ As competition increases, the costs associated with establishing and retaining high level sponsorship increases. Failure of retention will lead to increasing cost, as on-field authenticity with Nike’s product association may be lost, requiring increasing marketing investments.
If Nike fails to normalize inventory levels and successfully differentiate from its competitors, it risks losing profit and market share.
Source : Morgan Stanley, Euromonitor International, Nike’s 10K
High ImpactLow Impact
Highly
Likely
Not
Likely
G1
C2 C1
O1
G2
O2
Sponsorship Retention (C1)
Proliferation of E-Commerce (C2)
Competitor Risks
Implementation of DTC Strategy (O1)
Supply Chain Disruption (O2)
Operational Risks
US Normalization of Interest Rates (G1)
Slower Consumer Spending (G2)
Global Macro Risks
Risks in the Medium to Short Term Scenario Analysis
11
Source : Bloomberg, Factset, Capital IQ, Thompson One, Nike 10K, NASDAQ
Share Price Sensitivity
Exit Multiple
66.7 18.5x 19.0x 19.5x 20.0x 20.5x
WA
CC
5.9% 59.87 61.26 62.65 64.04 65.43
6.4% 58.57 59.93 61.29 62.65 64.01
6.9% 57.31 58.63 $59.96 61.29 62.62
7.4% 56.08 57.38 58.67 59.97 61.27
7.9% 54.88 56.15 57.42 58.69 59.96
Share Price Sensitivity
Target Return
Current Share Price $51.10
Target Share Price $60.32
Equity Upside 18.04%
Dividend Yield 1.12%
12 - Month Return 19.16%
Return Analysis
Recommendation - Buy
$74
$58
$55
$119
$81.01
$65
$32
$27
$19
$30
$31
$52
$54
$5 $20 $35 $50 $65 $80 $95 $110 $125 $140 $155
EV / LTM EBIDTA
EV / FY1 EBIDTA
EV / FY2 EBIDTA
Price / Earnings FY1
Price / Earnings FY2
Dividend Discount Model
DCF
Implied Price
Va
lua
tio
n M
etr
ic
Football Field ChartImplied share
**Note : Share price was calculated by using the average of all median multiples
0200040006000
48
.50
49
.50
50
.50
51
.50
52
.50
53
.50
54
.50
55
.50
56
.50
57
.50
58
.50
59
.50
60
.50
61
.50
62
.50
63
.50
Perpetuity Growth SimulationMonte Carlo Simulation, Over 99% Buy + Hold
Rating
0200040006000
49
.50
50
.50
51
.50
52
.50
53
.50
54
.50
55
.50
56
.50
57
.50
58
.50
59
.50
60
.50
61
.50
62
.50
63
.50
64
.50
Exit Multiple SimulationMonte Carlo Simulation, Over 99% Buy + Hold
Rating
Current
Share Price
Implied
Share Price
12Appendix
-10%
-5%
0%
5%
10%
'70 '75 '80 '85 '90 '95 '00 '05 '10 '15
Source: World Bank
Slowing GDP Growth from Developed Economies
European Union Japan United States
-15%
-10%
-5%
0%
5%
10%
15%
20%
'70 '75 '80 '85 '90 '95 '00 '05 '10 '15
Source: World Bank
Emerging Markets doing the heavy lifting
Brazil Russian Federation India China
13Appendix : Growth in the near term
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16
Source: FRED
U.S Real GDP, YoY Historical
0
0.5
1
1.5
2
2.5
2016E 2017E 2018E 2019E 2020E
Source: FRED, Economist, World Bank
Forecasted Real GDP growth 2016-2021E
0
0.5
1
1.5
2
2.5
2016E 2017E 2018E 2019E 2020E
Source: FRED, Economist, World Bank
Forecasted Inflation 2016-2021E
14Appendix : Fed Movement Likely in December…
$50,000
$51,000
$52,000
$53,000
$54,000
$55,000
$56,000
$57,000
01-01-2010 03-01-2011 05-01-2012 07-01-2013 09-01-2014
Source: FRED
Real median household income
Real Median Household Income
$1.15
$1.20
$1.25
$1.30
$1.35
$1.40
$1.45
$1.50
09-15-2015 01-15-2016 05-15-2016 09-15-2016
Source: Bank of Canada
USD shows sign of strengthening
USD/CAD Exchange Rate
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2015 2016 2017 2018 2019
Source: Bloomberg
FOMC Dot Plot
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Source: Bank of Canada, FRED
100% market expectation of Fed movement in December
Fed Funds Rate Canada Overnight Target Rate
15Appendix : Sensitivity Analysis
Enterprise Value Implied Equity Value
Exit Multiple Exit Multiple
100,467.7 18.5x 19.0x 19.5x 20.0x 20.5x 103,195.7 18.5x 19.0x 19.5x 20.0x 20.5x
WA
CC
5.9% 100,300 102,696 105,092 107,487 109,883
WA
CC
5.9% 103,028 105,424 107,820 110,215 112,611
6.4% 98,068 100,408 102,748 105,088 107,427 6.4% 100,796 103,136 105,476 107,816 110,155
6.9% 95,896 98,182 $100,468 102,753 105,039 6.9% 98,624 100,910 $103,196 105,481 107,767
7.4% 93,784 96,017 98,250 100,483 102,716 7.4% 96,512 98,745 100,978 103,211 105,444
7.9% 91,729 93,910 96,092 98,274 100,456 7.9% 94,457 96,638 98,820 101,002 103,184
Implied Share Price PV of Terminal Value as % of Enterprise Value
Exit Multiple Exit Multiple
60.0 18.5x 19.0x 19.5x 20.0x 20.5x 0.9 18.5x 19.0x 19.5x 20.0x 20.5x
WA
CC
5.9% 59.87 61.26 62.65 64.04 65.43
WA
CC
5.9% 88.4% 88.6% 88.9% 89.2% 89.4%
6.4% 58.57 59.93 61.29 62.65 64.01 6.4% 88.3% 88.6% 88.8% 89.1% 89.3%
6.9% 57.31 58.63 $59.96 61.29 62.62 6.9% 88.2% 88.5% 88.7% 89.0% 89.2%
7.4% 56.08 57.38 58.67 59.97 61.27 7.4% 88.1% 88.4% 88.6% 88.9% 89.1%
7.9% 54.88 56.15 57.42 58.69 59.96 7.9% 88.0% 88.3% 88.5% 88.8% 89.0%
Implied Perpetuity Growth Rate Implied Enterprise Value / LTM EBITDA
Exit Multiple Exit Multiple
0.0 18.5x 19.0x 19.5x 20.0x 20.5x 21.6 18.5x 19.0x 19.5x 20.0x 20.5x
WA
CC
5.9% 2.9% 3.0% 3.1% 3.1% 3.2%
WA
CC
5.9% 21.6x 22.1x 22.6x 23.1x 23.6x
6.4% 3.4% 3.5% 3.5% 3.6% 3.7% 6.4% 21.1x 21.6x 22.1x 22.6x 23.1x
6.9% 3.9% 4.0% 4.0% 4.1% 4.2% 6.9% 20.6x 21.1x 21.6x 22.1x 22.6x
7.4% 4.4% 4.4% 4.5% 4.6% 4.7% 7.4% 20.2x 20.6x 21.1x 21.6x 22.1x
7.9% 4.9% 4.9% 5.0% 5.1% 5.1% 7.9% 19.7x 20.2x 20.7x 21.1x 21.6x
16Appendix : DCF Assumptions
Assumptions 2014 2015 2016 2017 2018 2019 2020 2021 2022
Sales (% growth)NA 10.5% 5.8% 1.8% 12.0% 8.0% 11.0% 10.0% 9.0%
COGS (% sales)55.2% 54.6% 55.4% 55.9% 56.0% 56.0% 56.0% 56.0% 56.0%
SG&A (% sales)31.5% 32.2% 32.2% 32.7% 32.0% 32.0% 32.0% 32.0% 32.0%
Depreciation & Amortization (% sales)1.9% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
Capital Expenditures (% sales)3.2% 3.1% 3.5% 3.3% 3.0% 3.0% 3.0% 3.0% 3.0%
Tax Rate14.1% 14.1% 14.1% 14.1% 14.1% 14.1% 14.1% 14.1% 14.1%
Working Capital (% sales)13.9% 13.9% 13.9% 13.9% 13.9%