Gap Inc. Equity Valuation and Analysis Valued at November 1, 2006
Gap Inc. Equity Valuation and Analysis Valued at November 1, 2006
Gap Inc. Equity Valuation and Analysis Valued at November 1, 2006
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department because they use mainly oper<strong>at</strong>ional leases for there stores <strong>and</strong><br />
warehouses.<br />
Z score:<br />
1.2(5239-1942/8821)+ 1.4(1113/8821)+<br />
3.3(1745/8821)+<br />
0.6(14.6/3396)+<br />
1.0(16023/8821)<br />
= 3.1<br />
Summary of valu<strong>at</strong>ions<br />
For <strong>Gap</strong> <strong>Inc</strong>., some of the intrinsic valu<strong>at</strong>ions do not resemble the<br />
valu<strong>at</strong>ion for the company. The company appears to be way over valued by each<br />
method. Free Cash Flow method comes the closest to valuing <strong>Gap</strong> <strong>Inc</strong>.<br />
Estim<strong>at</strong>ed share<br />
price<br />
Free Cash flow 11.48<br />
Residual <strong>Inc</strong>ome 7.97<br />
Abnormal Earnings<br />
Growth 6.97<br />
LR ROI 11<br />
Actual Price 17.64<br />
Free Cash Flows is clearly the best method to use when valuing <strong>Gap</strong> <strong>Inc</strong>. The<br />
other methods valu<strong>at</strong>e to much on dividends paid or earnings r<strong>at</strong>her than cash<br />
from oper<strong>at</strong>ions or investments.<br />
50
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