Valuation Using Income Statement Multiples

The following table provides summary data for Guess? Inc. and its competitors, Ralph Lauren Corp. and The Gap Inc.

Guess

• company assumed value : ?
• equity assumed value : ?
• net operating profit after tax : $17 million
• net income : $14 million
• common shares outstanding : 65.6 shares

Ralph Lauren

• company assumed value : $8,906 million
• equity assumed value : $10,014 million
• net operating profit after tax : $471 million
• net income : $431 million
• common shares outstanding : 77.22 shares

The Gap

• company assumed value : $9,440 million
• equity assumed value : $9,560 million
• net operating profit after tax : $1,072 million
• net income : $1,003 million
• common shares outstanding : 375.8 shares

a. Compute the price to NOPAT ratio for both Ralph Lauren and Gap. b. Use Ralph Lauren and Gap as comparables, along with the price to NOPAT ratios from part a, and

then estimate for Guess? its company intrinsic value, its equity intrinsic value, and its equity intrinsic value per share.

c. Compute the price to net income ratio for both Ralph Lauren and Gap. d. Use Ralph Lauren and Gap as comparables, along with the price to net income ratios from part c, and

then estimate for Guess? its equity intrinsic value and its equity intrinsic value per share.