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Agenda Company Overview – Rena
Financial Statement Analysis – Greysi
Firm Riskiness – Helen
Beta – Helen
Cost of Equity – Rena
Firm Valuation Discount Dividend Model (DDM) – Greysi Free Cash Flow Model (FCFM) – Helen Multiples (P/E ratio) – Rena
Final Valuation and Recommendations – Greysi
Company Overview
Brief History Founded: 1955
HQ: Downers Grove, Illinois
Diversified Global Manufacturer
Volume: > $8 Billion
Exchange: NYSE under “DOV”
Company Overview
4 Major Operating Segments
Industry-leading product innovation
Providing innovative
products & solutions that
serve drilling, production and
downstream markets
1. Global pump & fluid handling
markets
2. Refrigeration systems
Provides integrated printing,
coding, identification equipment
Provide acoustic components
for consumer electric markets
*serves life sciences,
aerospace, & telecom
markets
Financial Statement AnalysisLiquidity Ratios
Dover Corp. 2011 2010 2009 Industry
Current Ratio 2.82x 2.73x 2.60x 1.2x
Quick Ratio 2.16x 2.16x 2.01x 0.9x
Asset Management Ratios
Dover Corp. 2011 2010 2009 Industry
Inventory Turnover9.9x 10.09x 9.36x 5.8x
Day Sales Outstanding55 days 56 days 60 days N/A
Fixed Asset Turnover7.94x 8.45x 6.45x N/A
Total Asset Turnover0.84x 0.76x 0.68x 0.6x
Profitability Ratios
Market Value Ratios
Debt Management Ratios
Dover Corp. 2011 2010 2009 Industry
Total Debt 48% 47% 48% N/A
Interest Coverage 10.47x 9.48x 5.88x 6.8x
Dover Corp. 2011 2010 2009 Industry
Profit Margin 11.26% 10.54% 6.67% 8.79%
Return on Assets 9.42% 8.18% 4.52% 5.1%
Return on Equity 18.16% 15.47% 8.73% 14.67%
Dover Corp. 2011 2010 2009 Industry
Price Earnings 11.72x 14.86x 20.3x 21x
Market to Book 2.13x 2.3x 1.77x 2.55x
Financial Statement Analysis
Firm Riskiness Economic conditions and uncertainties
Competitive environment
Advanced technology
Increased price/unavailability of raw materials
Litigations
Foreign operations
Beta
Dover’s computed beta: 1.4
(Yahoo Finance) Dover beta: 1.5
Our beta will be used in the Capital Asset Pricing Model that will help calculate the expected return of Dover.
Valuation: Dividend Discount Model
Assumptions Non-constant growth rate: 12.8% Constant growth rate: 5.5% Cost of equity: 9.89%
Valuation for December 2011: $50.45
Stock Price as of 12/31/11: $56.51 per share
Valuation: FCFM
Assumptions Based on past 3 years (2011, 2010, 2009)
Created pro forma financial statement for next 10 years Forecasted unlevered free cash flow Dover’s value was estimated to be $244.25 per share
In comparison to $56.51 per share on December 2011
Valuation: Multiples
Stock Price as of 12/31/11: $56.51 per share
Method 1: Valuation = $54.04
Method 2: Valuation = $65.14
Method 3: Valuation = $140.32
Final Valuation Estimate and Recommendation
Dover’s value estimate for 12/11 is $56.54 per share
Stock price on 12/31/11 was $56.51 per share
Average of – DDM: $50.45 per share– Valuation by Multiples Method
1: $54.04 per share– Method 2: $65.14 per share
Recommendation: BUY!!!