Culverhouse Investment Management Group Valuation Methodologies Michael Jaklitsch

OVERVIEW “Price is what you pay. Value is what you get.” -Benjamin Graham  What is it worth?: 1.) $1,000,000 straight cash 2.) House in Miami 3.) University of Alabama brand 4.) Symantec Corporation

Appreciating the Art  2 key valuation questions: 1)What is the company worth?  HIGHLY subjective 2)Why is it worth that much?  “value drivers”  Understand what drives value & how value can change  “How does this company make money?”

Understanding Enterprise Value

How Good Is This Company at Making Money? Sales Operating Income (EBIT) EBITDA Free Cash Flow

3 Pillars of Valuation Public Comparable Analysis **Acquisition Comparable Analysis, Liquidation Analysis** Discounted Cash Flow Analysis

Public Comparable Analysis  Comparison with similar companies  Analysis at a specific point in time  RELATIVE value

Building Good Comps  Similar in terms of: 1)Operations 2)Financials  Subjective  Where do I find this cool stuff?: 1)Scary Bloombergs 2)Yahoo Finance 3)Morningstar.com

Comps to Focus On ….also:  Operating Margin  FCF yield  P/E  Return on Invested Capital

Discounted Cash Flow Analysis  Intrinsic value of the company  Theoretical vs. relative value  Present Value of the cash that company will make in the future  Gotta discount that cash back to today

Advantages of a DCF Valuation  Intrinsic valuation  Flexible, adaptable analysis  Can tinker & play  Requires model maker to scrutinize drivers of value

VALUATION Sales CAGR : -0.2% EBIT CAGR : 3.0% FCF CAGR : 3.7%

Questions? In 2 weeks…..the one and only Mac Fountain