Business Valuation of Polo Ralph Lauren Corporation - Mark Moore ...

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Based on the Comparable forward P/E, the implied stock valuation is well belowthe Actual Current Value of $38.41. There were three main competitors used for thisvaluation, and were based on the average of their forward P/E ratios. The Benchmarkgroup used has a large spread in their Price Per Shares which makes their P/E ratioswidely dispersed. This causes the comparable P/E ratio to have a lower quality since thecompetitors used have such varying ratios.Forward PEG RatioCompetitor Forward P/E 5 Yr. Growth Rate Fwd. PEGGap 17.78 6.93 2.57Liz Clairborne 13.99 10.54 1.33Tommy Hilfiger 9.53 2.76 3.45Average ofCompetitors: 2.45Industry Fwd. PEGAverageFwd. EPS5 Yr. GrowthRateExpectedPricePolo Ralph Lauren 2.45 1.61 8.94 $35.24Forward PEG = (Forward P/E)/(5 Yr GrowthRate)Polo Expected Price = (Competitors Fwd. PEG Avg)*(Fwd. EPS of Polo)*(5 Yr. Growth Rate of Polo)The implied stock valuation of PEG resulted fairly the same as the Actual CurrentValue of $38.41. The current earnings come close to the Forward PEG Valuation results,and should reflect the Future earnings. The Forward PEG valuation uses the threecompetitor’s averages of the Forward P/E ratios divided by the 5 year Growth Rate. TheIndustry Forward PEG valuation is more narrowed and more precise than the ForwardP/E Valuation results.30
Price to Sales RatioCompetitor Price Per Share Sales/Share P/S RatioGap 21.51 16.55 1.30Liz Clairborne 40.02 42.16 0.95Tommy Hilfiger 11.24 20.05 0.56Average ofCompetitors: 0.94ExpectedIndustry P/S Ratio Sales/ShareShare PricePolo Ralph Lauren 0.94 25.48 $23.95P/S Ratio = (Price per Share)/(Sales per Share)Polo Expected Price = (Competitors Avg P/S Ratio)*(Sales per Share of Polo)The P/S Valuation results are significantly lower than that of the Actual CurrentValue of $38.41. The reasons for these poor results lie with in the Different andScattered Prices of the Competitors in the industry. The price per share ranges from$11.24-$40.02. This would account for the Price to Sales ratio to be significantly lowerthan the large industry averages.Market to Book ValuationCompetitor Book Value Price M/B RatioGap 5.74 21.51 3.75Liz Clairborne 16.66 40.02 2.40Tommy Hilfiger 13.3 11.24 0.85Average ofCompetitors: 2.33Expected SharePricePolo Ralph Lauren 13.11 $30.57*all BV and Prices relate to the Most Recent Quarter (MRQ) found at http://finance.yahoo.comM/B Ratio = (Price per Share)/(Book Value per Share)Polo Expected Price = (Competitors Avg M/B Ratio)*(BV per Share of Polo)By using the Market to Book Valuation, the estimated value produced is notsubstantially lower than the Actual Current Value of the Stock. Tommy Hilfiger resultedin a very low M/B ratio compared to the other competitors. This might have thrown offthe results because of the considerable differences in numbers of Tommy Hilfiger. This31
Page 1 and 2: Business Valuation of Polo Ralph La
Page 3 and 4: Executive SummaryThe objective of t
Page 5 and 6: Industry Overview and Analysis.Comp
Page 7 and 8: Products and Services:Polo Ralph La
Page 9 and 10: Company-operated a total of 3,022 s
Page 11 and 12: Ralph Lauren lifestyle through new
Page 13 and 14: Lauren must remain a respected inno
Page 15: Net Accounts ReceivableA reserve fo
Page 18 and 19: offset by the increase in selling s
Page 20 and 21: Evaluation of the Quality of Disclo
Page 22 and 23: Ratio Analysis of Polo Ralph Lauren
Page 24 and 25: for the company. The Times Interest
Page 26 and 27: average of this ratio, with the exc
Page 28 and 29: (In millions of dollars)Annual Bala
Page 32 and 33: occurred because their Book Value a
Page 34 and 35: Sensitivity Analysisg0 0.02 0.03 0.
Page 36 and 37: on those obligations. This valuatio
Page 38 and 39: AppendixCross Sectional (Benchmark)
Page 40 and 41: Net Profit Margin 4/3/2004 3/29/200
Page 42 and 43: Return on Equity (ROE) 4/3/2004 3/2
Page 44 and 45: Quick Ratio 4/3/2004 3/29/2003 3/30
Page 46 and 47: Discounted Dividends (Amounts in mi
Page 48: Residual Income 1 2 3 4 5 6 7 8 9 1
Page 51 and 52: 51Polo Ralph Lauren Corp.As Reporte
Page 54 and 55: 54Polo Ralph Lauren Corp.As Reporte

Business Valuation of Polo Ralph Lauren Corporation - Mark Moore ...

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