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Similar to 2016 Walsh University CFA Challenge Team PowerPoint (1)
Similar to 2016 Walsh University CFA Challenge Team PowerPoint (1) (20)
2016 Walsh University CFA Challenge Team PowerPoint (1)
- 1. Josh Ippolito Jerad Kitzler Iagos Lucca Matt Strobelt CFA Institute Research Challenge Hosted by Local CFA Society of Cleveland Walsh University
- 2. Company Overview Industry & Competitors Valuation Financial Analysis ConclusionRisk Analysis Executive Summary Signet Jewelers Limited (NYSE: SIG) ❏ 3,579 worldwide store fronts ❏ #1 Specialty Jewelry Retailer in the U.S., Canada and the UK ❏ 50% of portfolio breakdown is Bridal 1
- 3. Company Overview Industry & Competitors Valuation Financial Analysis ConclusionRisk Analysis Industry Overview ❏ Supplier Power - Low ❏ Rivalry among Competitors - High ❏ Threat of Substitutes - High ❏ Buyer Power - Low ❏ Threat of New Entrants - Moderate Legend 0: No threat to Signet 1: Insignificant threat to Signet 2: Low threat to Signet 3: Moderate threat to Signet 4: Significant threat to Signet 5: High threat to Signet 2
- 4. Company Overview Industry & Competitors Valuation Financial Analysis ConclusionRisk Analysis Competitive Analysis Source: U.S. Bureau of Economic Analysis; Team Estimates Company Gross Margin Operating Margin Net Profit Margin Signet 36.16% 10.05% 6.65% Tiffany 59.70% 20.98% 11.39% Blue Nile 18.30% 3.00% 2.06% L-Brands 41.98% 17.05% 9.10% Coach 69.39% 14.74% 9.60% 3
- 5. Company Overview Industry & Competitors Valuation Financial Analysis ConclusionRisk Analysis Synergies 4
- 6. Company Overview Industry & Competitors Valuation Financial Analysis ConclusionRisk Analysis Revenue Breakdown ❏ Net synergies ❏ New product launches ❏ Aggressive marketing ❏ Competitive advantage in jewelry 5
- 7. Company Overview Industry & Competitors Valuation Financial Analysis ConclusionRisk Analysis Debt Analysis ❏ Signet estimates 2016 adjusted leverage ratio of 3.5x ❏ No additional debt financing needed in short-term 6
- 8. Company Overview Industry & Competitors Valuation Financial Analysis ConclusionRisk Analysis Credit Analysis ❏ Attributed to Sterling Division in-house credit ❏ Increase in credit participation ❏ Estimating credit sales at 63% of total sales 7
- 9. Company Overview Industry & Competitors Valuation Financial Analysis ConclusionRisk Analysis Utilization of Cash Flows ❏ Sustainable dividend growth (5-year CAGR model yields 16.4% growth) 8
- 10. Company Overview Industry & Competitors Valuation Financial Analysis ConclusionRisk Analysis Utilization of Cash Flows ❏ Gradual investment in the Kay, Zales, and Jared store concepts 9
- 11. Company Overview Industry & Competitors Valuation Financial Analysis ConclusionRisk Analysis Discounted Cash Flow (1)Risk Free Rate: 10-Year Treasury Bond (as of 02/05/2016) (2)Daily Regression over 3 Year Period (1) (2) 10
- 12. Company Overview Industry & Competitors Valuation Financial Analysis ConclusionRisk Analysis Valuation Target Target Price Per Share $142.50 11
- 13. Company Overview Industry & Competitors Valuation Financial Analysis ConclusionRisk Analysis Multiples Valuation ❏ Support of DCF Forecasted Stock Price ❏ Similar Retail Market Used (In Millions) 12
- 14. Company Overview Industry & Competitors Valuation Financial Analysis ConclusionRisk Analysis Investment Risks ❏ Discretionary Income (R1) ❏ Product Price Sensitivity (R2) ❏ Customer Financing (R3) ❏ Fluctuations in Diamond Pricing (R4) ❏ Seasonality (R5) ❏ Inability to Train and Maintain Competent Employees (R6) 13
- 15. Company Overview Industry & Competitors Valuation Financial Analysis ConclusionRisk Analysis Conclusion Buy Recommendation Investment Strengths ❏ Vertical Integration ❏ Impactful Synergies ❏ Storefront Experience ❏ Bridal ❏ Customer Financing 37% Upside $103.93 $142.50 Investment Concerns ❏ 63% Diamond Merchandise Mix ❏ Discretionary Income ❏ Global Reach 14 *As of February 18, 2016
- 16. Company Overview Industry & Competitors Valuation Financial Analysis ConclusionRisk Analysis Appendix Financial Analysis ❏ Projected Annual Income Statement ❏ Common Size Income Statement ❏ Projected Annual Balance Sheet ❏ Common Size Balance Sheet ❏ Projected Statement of Cash Flow ❏ 2016 Forecasted Income Statement ❏ 2016 Q4 Comps Forecast ❏ 2016 Q4 Total Sales Forecast ❏ Revenue Forecast ❏ Debt Analysis ❏ ROE Analysis ❏ Credit Analysis ❏ Financial Ratios ❏ Earnings per Share Competitor Analysis ❏ Porter’s Five Forces Model ❏ Porter’s Three Generic Strategies ❏ Signet SWOT Analysis ❏ Tiffany & Co. SWOT Analysis ❏ Blue Nile SWOT Analysis ❏ Competitor Ratios Valuation Methodology ❏ Discounted Cash Flows ❏ Sensitivity Analysis ❏ Multiple Valuation ❏ WACC Various ❏ RJC Members ❏ Board of Directors ❏ Real Personal Consumption Expenditures ❏ Risk Matrix ❏ Real Estate 15
- 17. Conclusion Projected Annual Income Statement Appendix
- 18. Conclusion Common Size Income Statement Appendix
- 19. Projected Annual Balance Sheet Appendix
- 20. Common Size Balance Sheet Appendix
- 21. Conclusion Projected Statement of Cash Flows Appendix
- 22. 2016 Forecasted Income Statement Appendix
- 23. 2016 Q4 Comps Forecast Appendix
- 24. 2016 Q4 Total Sales Forecast Appendix
- 25. Revenue Forecast Appendix Fiscal 2016: Fiscal 2017: Fiscal 2018 & 2019:
- 27. Return on Equity Analysis Appendix
- 30. Earnings per Share Appendix
- 31. Conclusion Porter’s Five Forces Model Appendix Legend 0: No threat to Signet 1: Insignificant threat to Signet 2: Low threat to Signet 3: Moderate threat to Signet 4: Significant threat to Signet 5: High threat to Signet ❏ Supplier Power - Low ❏ Rivalry among Competitors - High ❏ Threat of Substitutes - High ❏ Buyer Power - Low ❏ Threat of New Entrants - Moderate
- 32. Porter’s Three Generic Strategies Appendix
- 33. Signet SWOT Analysis Appendix
- 34. Tiffany & Co. SWOT Analysis Appendix
- 35. Blue Nile SWOT Analysis Appendix
- 36. Multiple Valuation Methods Appendix (In Millions)
- 38. Competitor Ratios Appendix Company Gross Margin Operating Margin Net Profit Margin Signet 36.16% 10.05% 6.65% Tiffany 59.70% 20.98% 11.39% Blue Nile 18.30% 3.00% 2.06% L-Brands 41.98% 17.05% 9.10% Coach 69.39% 14.74% 9.60%
- 39. Competitor Ratios Appendix Source: U.S. Bureau of Economic Analysis; Team Estimates
- 40. RJC Members Appendix (RJC) Founders ❏ ABN AMRO, ❏ BHP Billiton Diamonds ❏ Cartier ❏ World Jewellery Confederation ❏ Diamond Trading Company ❏ Diarough, Jewelers of America ❏ Zale Corporation ❏ National Association of Goldsmiths (UK) ❏ Newmont Mining ❏ Rio Tinto ❏ Rosy Blue ❏ Signet Group ❏ Tiffany & Co.
- 41. Board of Directors Appendix ❏ Mark Light, CEO - Appointed to Board of Directors October 2014. Mr. Light started as a sales associate for Signet Sterling division in 1978. ❏ Todd Stitzer, Chairman - Director of Massachusetts Life Insurance. ❏ Virginia C. Drosos - President, CEO and Director of Assurex Health. ❏ Dale Hilpert - Past CEO of Williams-Sonoma ❏ Helen E. McClusky- Director of Avon. ❏ Marianne Miller Parrs - Director of Stanley Black & Decker Inc. ❏ Thomas G. Plaskett - Chairman of Fox Run Capital Associates. ❏ Robert J. Stack - Director of IMI plc. ❏ Eugenia M Ulasewicz - Director of Bunzl plc and Vince Holding corporation. Past president of Burberry Group plc's American division. ❏ Russel Walls - Director of Biocon Limited, Mytrah Energy Limited, Aviva Italian Holding S.p.A. Chairman of Aviva Life & Pensions UK Limited.
- 42. Conclusion Discounted Cash Flow Valuation Appendix
- 43. Discounted Cash Flow Valuation (continued) Appendix
- 44. Weighted Average Cost of Capital Appendix (1)Risk Free Rate: 10-Year Treasury Bond (as of 02/05/2016) (2)Daily Regression over 3 Year Period (1) (2)
- 45. Risk Matrix Appendix ❏ Discretionary Income (R1) ❏ Product Price Sensitivity (R2) ❏ Customer Financing (R3) ❏ Fluctuations in Diamond Pricing (R4) ❏ Seasonality (R5) ❏ Inability to Train and Maintain Competent Employees (R6)