In December 2011, American Greetings closed at $12.51 a share. This was the lowest for the company in the previous 36 months. This has become a concern for management due to the concerning decline in the greeting card industry. Analysts have provided some estimates both as a best-case scenario and a worst-case scenario. We are tasked with the challenge of using those estimates to determine the valuation of the company.

1. The shares of American Greetings are currently trading at an EBITDA multiple that is at the bottom of its peer group. Do you think 3.5 times multiple is appropriate for American Greetings? If not, what multiple of EBITDA do you think is justified? What is the implied share price that corresponds to that multiple?

2. Please model cash flows for American Greetings for fiscal years 2012 through 2015 based on the two sets of ratios in case Exhibit 8. Based on the DCF associated with forecasts, what is the implied enterprise value of American Greetings and the corresponding share price?

3. What are the key drivers of value in your model?

4. What do you believe to be the value of American Greetings shares? Do you recommend repurchasing shares?

Answer rating: 100% (QA)

1 Currently the companys EBITDA multiple is 35x but I believe it should be closer to 75 or 8x Consid... View the full answer