Security Valuation Essay Example

Security Valuation; Bega Cheese Limited

From the security valuation analysis below, it s advisable to invest in Bega cheese limits because it’s current price of 6.15 as at May 2017 is ideal (Ranganatham, 2006). The company’s stock is trading at 59% of its intrinsic value approximated at $0.89 based on the discounted cash flow valuation. The one year target is t $10.67 which means a significance of almost 10% capital gain over four one year holding period and the 12.5% net returns. We approximated network revenue in financial period ending 2017 for the next three years.

Industry revenue and bega cheeses market share

. (Warren, 2006)We collected the finical data of bega cheese limited industrial income and the number of stores approximated by the euro monitor in Australia for the next four years. we employed the past similar stores revenue expansion and contrasting the number of bega cheese stores with pizza stores to create an hypothesis with regards to market share of the company for the period ending 2015/2017

Revenue (TTM)

Net income (TTM)

Market cap

Select Harvests Limited

Ridley Corporation Ltd

Bellamy’s Australia Ltd

Freedom Foods Group Ltd

Bega Cheese Ltd

Australian Agricultural Company Ltd

Ingham’s Group Ltd

Costa Group Holdings Ltd

Network sales estimation

We approximated the network revenue of Bega cheese limited for the next four years based on the market share of the company assumption in Pizza consumer food industry in ANZ. The network revenue of bega Cheese in ANZ is deeming to be impacted by the strong Australian dollar in financial year 2016/17. We undertook a sensitivity analysis for exchange rate to ascertain hour our valuation would be affected.

Industry revenue

$ 1,255,725,000

$ 1,381,297,500

$ 1,519,427,250

$ 1,671,369,975

Market share of Bega cheese

Network sales of Bega cheese in Europe

$ 1,195,967,000

$ 1,303,604,030

$ 1,420,928,393

$ 1,548,811,948


Margin of Safety; (100%)

Intrinsic value

Current market share price

Since there is not some inherent intricacies in finding a close contrastable firms and mixed outcome in relative valuation, we worked out the intrinsic value based on DCF valuation. This valuation provide use the intrinsic value of bega cheese limited at $0.89 per share contrasted with the market prevailing market price of $6.15, which we believe that the market at present fairly value the stocks (Ranganatham, 2006). We advise holding the Bega cheese based on the intrinsic value, the current share price, and the margin of safety of 15%.

Relative valuation

In relative valuation, employ the price earnings ratio with contrastable methodologies as depicted below.

P/E Valuation

Current Price

Trailing EPS

Estimated EPS

Leading P/E

Industry P/E Valuation

The average value of Bega cheese limited when contrasted with the industrial average points out that Bega cheese limited is overvalued at an implied price of $5.9. We retrieved the same outcome when contrasted with the sector performance. Our implied price is hence $ 4.01

(Source; Yahoo finance)

Security Valuation

Industry P/E Valuation

Implied Price ($)

Fast Food Industry

Average Expected Price


From our valuation, it is estimated that the market share of the company in Australian and European market is anticipated to grow from 41% in the financial period 2017 to 6% in the financial period ending 201 if the bega cheese limited complies with the target of opening more retail outlets in Europe. IN Australia and new Zealand, Bega cheese performed well by growing its market share from almost 24% in the financial period 2012 to almost 30% in the financial period ending 2016. We approximate that Bega cheese will keep on growing its market share from almost 24% in the year 2012 to 20% in the year ending 2017 a same expansion in the market share contrasted with the European market as New Zealand market depicted substantial growth in revenue as well as roll out of new retail outlets.


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