Discounted Cash Flow and Football Field Analysis Essay

Submitted By EvelinaChuma
Words: 826
Pages: 4
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FIN 667
Presented by:
Jue Wang, Yeqing Luo, Yixi Zhang, Zheng Ni

Executive Summary
• Company’s Business
– Company Overview
– SWOT Analysis

• Financial Statement
– Growth Rate
– DCF Valuation

• Industry Environment
– Historical Analysis
– Peer Group Analysis
2

Company Overview

• Chipotle is a worldwide chain of restaurant
• Opened 185 new restaurants in 2013, and delivered revenue of $3.21 billion, an increase of 17.7% for the year
• Its restaurant-level operating margins were among the best in the industry at 26.6%
3

Company Overview

4

SWOT Analysis

• Strengths:
– Well-recognized brand in US with positive brand image and customer loyalty
– All restaurants are owned by company

• Weaknesses:
– More expensive in Menu
– Chipotle’s major presence is only in US
5

SWOT Analysis
• Opportunities:
– Expand to new markets in US
– There is a growing trend of health consciousness amongst people

• Threats:
– The competition within the fast food industry is intensive. – Consumers’ tastes may change and prices of raw materials are volatile.
6

Calculation of WACC
• WACC = COE*Equity ratio+COD*(1-tax rate)*Debt ratio
• Debt-free
• COE= Risk-free rate + Beta*(Expected return
– Risk -free rate) = 2.80% + 0.74*(6.06% 2.80%) = 5.21%
• WACC = COE = 5.21%
7

Growth Rate Analysis

8

Calculation of Growth Rate

• Net investment = Invested capital 1 - Invested capital 0 = 1565.52-1276.26=289.26
• Investment rate = Net Investment/ NOPLAT
=289.26/326.56=88.57%
• Growth rate= Investment rate *
ROIC=88.57%*20.86%=18.48%
9

Risks in Maintain the High Growth Rate

Growth strategy : Open new restaurants
• Delays in opening restaurants
• The new restaurants opened may not be profitable • The expansion into international markets is risky 10

DCF Analysis

11

Peer Group Analysis
Peer
Comparison
Ratios

Liquidity
Ratio

Financial
Leverage

Efficiency Ratio

Profitablity Ratio

Cash
Asset
current Asset/Equit Conversion
Gross
Turnove ratio y
Margin
Cycle r Chipotle
Mexican Grill

2.93

McDonald's
Corp.

1.45

Yum Brands
Inc.

0.87

Panera Bread
Company, Inc.

1.34

Operating
Margin

EBT
Margin

-4.39

1.77

27.11%

16.69%

16.54%

-2.38

0.81

39.24%

31.21%

29.38%

4.18

-52.03

1.53

27.73%

16.38%

12.22%

1.73

1.54

7.67

1.86

23.48%

13.28%

13.60%

Dunkin Brands
Group Inc.

1.19

9.28

-

78.09%

36.38%

29.29%

Starbucks Corp

1.27

57.14%

-2.19%

-1.54%

2.31

0.20
2.57

52.81

1.51

Company
Ticker
Market Cap
Current Price
Diluted EPS
Trailing P/E
Forward P/E

Relative Multiples Analysis
Chipotle
Mexican
Grill

Dunkin
McDonald's Yum Brands Panera Bread Brands
Starbucks Average
Group
Corp.
Inc.
Company, Inc.
Corp
Inc.

CMG

MCD

YUM

PNRA

DNKN

SBUX

15.06 B

99.01B

33.12 B

5.10 B

4.84 B

53.16 B

39.05

476.28

99.88

74.37

177.4

46.51

70.38

93.71

10.47

5.5

2.39

6.61

1.36

0.15

3.20

45.66

18.18

31.16

26.83

33.42

456.95

113.31

30.66

15.99

20.6

24.17

21.64

22.23

20.93

ROIC

20.86%

19.51%

25.89%

23.88%

8.57%

37.50%

23%

ROA

17.94%

15.69%

15.02%

15.85%

5.45%

15.83%

ROE
P/B
P/S

13.57%

22.77%

36.33%

47.06%

25.78%

38.39%

2.33%

29.98%

9.49

6.23

15.09

6.5

12.18

11.06

10.21

4.6

3.54

2.54

2.21

6.93

3.52

3.75

PEG

1.86

2.35

2.23

1.57

1.63

1.39

1.83

Enterprise
Value/Revenue

4.55

3.94

2.84

2.16

9.38

3.48

Enterprise
Value/EBITDA

23.61

4.36
10.98

13.79

12.14

20.26

17.49

14.93

Relative Multiples Valuation
Peer Companies
McDonald's Corp.
Yum Brands Inc.
Panera Bread
Company, Inc.
Dunkin Brands Group
Inc.
Starbucks Corp
Peer Average
Chipotle
EBITDA/Revenue
Implied Enterprise
Value
Shares
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