This case examines the 2012 share repurchase decision of greeting card company American Greetings. At the time of the decision, American Greetings stock is trading at valuation multiples that are the lowest among its peer group and the greeting card industry is facing an important structural shift. As the decision hinges in part on the value of the company, students are invited to build a simple model of the company’s future cash flows and derive an implied value. As the company is arguably in a state of maturity or decline, a discussion of steady state economics is particularly germane.” 

Learning Objectives Part 1 of American Greetings Case Analysis Using the Excel Template for 

Part 1: Perform Common-Size Ratios on Income Statement & Balance Sheet Estimate the firm's Weighted Average Cost of Capital Build a financial forecast for the income statement based on given assumptions. Interpret and form an appreciation for terminal value assumptions and their impact on firm valuation. Turn the forecast into annual free cash flows. 

Part 2 of American Greetings Case Analysis Using the Excel Template for Part 2: Perform the discounted cash flow valuation technique based on a simple discounted cash flow model for both the bullish and bearish scenario. Perform firm valuation using both the EV/Revenue and EV/EBITDA market multiples. Understand what the implied equity market values mean. Begin your memo for Part 3 by analyzing Part 1. 

Part 3 of American Greetings Case Analysis Write a lengthy memo to the President of American Greetings. Discuss all findings from Part 1 and Part 2 of the case. Describe the time trend ie changes over time, in the common size ratios. Notice any patterns.

Describe what they mean, and interpret if the trend is a good or bad trend. Interpret your forecast. Is it representative of American Greetings future? This is a good place for a Strengths, Weaknesses, Opportunities and Threats analysis. 

Describe how the cash flows from the actual statements and the forecast change over time. Discuss the assumptions involved in calculating the WACC and how it affects your equity estimates. 

Build intuition on the relationship between firm growth, operating profitability, and value creation. Describe each of your valuations as to whether they create or destroy company value. Must relate it to the price per share that you found in the discounted cash flow and the market multiples valuations. Discuss shareholder distribution policy theory and practice with regard to share repurchases and dividends. Make a clear recommendation as to whether American Greetings should repurchase shares of stock. Indicate how your decision will affect the company. Also, indicate if there is an alternative suggestion regarding their stock dividend.

Answer rating: 100% (QA)

a 1 The commonsize ratios for American Greetings income statement and balance sheet are as follows Income Statement Revenue 1000 Cost of Goods Sold 600 Gross Profit 400 Selling General Administrative ... View the full answer