Comparative Analysis of Estimated Market Values of Selected Companies

Yuanxing Liu

Master's thesis

Abstract:

Based on the case that Xinjiang cotton encountered resistance from foreign brands in China in 2021, we select main participants ANTA and NIKE as subjects of this thesis. ANTA is the largest producers of sports products in China established in 1991, while NIKE is the largest one in the USA as well as in the whole world which was founded in 1972. The main aim of this thesis is to analyze differences in chosen market multiplicator for two companies from the same industry and different countries by means of key value driver formula and pyramidal decomposition. Excepting the first chapter is for the introduction and the last chapter is for conclusion, which contains the whole structure of the thesis and some insights about the results concluded from chapter 4, there are the synopsis of the other three main chapters. In the chapter two, there are description of valuation process methodology, financial models and other financial analysis methodology, including Monte Carlo Simulation, Cholesky decomposition and Geometric Brownian Motion, pyramidal decomposition,leverage ratios, liquidity ratios, probability ratios, efficiency ratios, and Altman’s Zscore. In the chapter three, characterization of input data and selected companies will be introduced. This section revolves around major development process, status and brand glory of ANTA and NIKE, which helps readers to be familiar with these two famous sports brands. Next, we will make financial analysis about two companies, which includes common size analysis and financial ratios analysis like liquidity ratios, liability ratios, efficiency ratios, profitability ratios and so on, which will tell us the ability of these two companies to make profit, allocate funds and pay the debts, etc. In the chapter four, it contains comparative analysis of market values of selected companies based on key value driver formula. We firstly estimate revenues for 2021 by applying knowledge from financial models including Monte Carlo Simulation, Cholesky decomposition and Geometric Brownian Motion. Then we make predictions for the financial plan for the next year based on 10000 random variables according to financial analysis. Then, we will estimate free cash flow. Next, the results of key value driver formula will show the value of both companies. And the pyramidal decomposition will show us the influence of each indicators no matter it is positive or negative. Finally, we will make sensitivity analysis, it shows how the pyramidal decomposition will change, if some input parameters will change about some percentage.

Abstract:

Based on the case that Xinjiang cotton encountered resistance from foreign brands in China in 2021, we select main participants ANTA and NIKE as subjects of this thesis. ANTA is the largest producers of sports products in China established in 1991, while NIKE is the largest one in the USA as well as in the whole world which was founded in 1972. The main aim of this thesis is to analyze differences in chosen market multiplicator for two companies from the same industry and different countries by means of key value driver formula and pyramidal decomposition. Excepting the first chapter is for the introduction and the last chapter is for conclusion, which contains the whole structure of the thesis and some insights about the results concluded from chapter 4, there are the synopsis of the other three main chapters. In the chapter two, there are description of valuation process methodology, financial models and other financial analysis methodology, including Monte Carlo Simulation, Cholesky decomposition and Geometric Brownian Motion, pyramidal decomposition,leverage ratios, liquidity ratios, probability ratios, efficiency ratios, and Altman’s Zscore. In the chapter three, characterization of input data and selected companies will be introduced. This section revolves around major development process, status and brand glory of ANTA and NIKE, which helps readers to be familiar with these two famous sports brands. Next, we will make financial analysis about two companies, which includes common size analysis and financial ratios analysis like liquidity ratios, liability ratios, efficiency ratios, profitability ratios and so on, which will tell us the ability of these two companies to make profit, allocate funds and pay the debts, etc. In the chapter four, it contains comparative analysis of market values of selected companies based on key value driver formula. We firstly estimate revenues for 2021 by applying knowledge from financial models including Monte Carlo Simulation, Cholesky decomposition and Geometric Brownian Motion. Then we make predictions for the financial plan for the next year based on 10000 random variables according to financial analysis. Then, we will estimate free cash flow. Next, the results of key value driver formula will show the value of both companies. And the pyramidal decomposition will show us the influence of each indicators no matter it is positive or negative. Finally, we will make sensitivity analysis, it shows how the pyramidal decomposition will change, if some input parameters will change about some percentage.

Keywords

key value driver formula, financial plan, market multiplicator, pyramidal decomposition, financial models, income approach, market approach, financial analysis, sensitivity analysis

Keywords

key value driver formula, financial plan, market multiplicator, pyramidal decomposition, financial models, income approach, market approach, financial analysis, sensitivity analysis

Language used: English

Date on which the thesis was submitted / produced: 22. 4. 2022

Thesis defence

• Date of defence: 24. 5. 2022
• Supervisor: Petr Gurný
• Reader: Zdeněk Zmeškal

VSB – Technical University of Ostrava

Ekonomická fakulta

Master programme:
Finance