Reebok Mock Presentation & Analysis Tools Presented by Investment Club Officers
Overview
News Important Events: n 1996: The push into performance sneakers also translated into large increases in expenses, resulting in decreasing net income, from $254. 5 million in 1994 to $164. 8 million in 1995 to $139 million in 1996. n 1998: Reebok took a restructuring charge of $23. 7 million in the first quarter of 1998 for costs related to eliminating management layers, combining business units, and cutting its workforce by 500, or 10 percent. n 1999: Declining sales prompt Reebok to lay off 10% of its global workforce. Recent News: n n n 2001: Clearly Canadian Beverage Corp. and Reebok jointly launch Reebok Fitness Water 2001 Aug. : NBA grants Reebok a ten-year license to design, manufacture, and market NBA licensed merchandise. 2002: Reebok secures a 10 -year exclusive license from the National Football League.
Du Pont Analysis Return on equity = (ROE) Asset turnover * Net profit margin * leverage (NPM) (TATR) 1/(1 -DR) (Net profit/Equity) = (Net profit/Sales) * (Sales/Total assets) * (Total assets/Equity)
Key Ratios
Key Index Trends Income Statement:
Key Index Trends Balance Sheet:
EV/EBITDA Reebok: 1. 71 Nike: 13. 24 ADIDAS: 41. 01 The EV/EBITDA ratio shows that firms selling for a low EV/EBITDA multiple compared to competitors are assumed to be undervalued. This ratio relates the total market value of the firm to the EBITDA We remove cash holdings because the interest income from cash is not counted as a part of EBITDA. If we did not subtract the cash, the end result would result in an overstatement of the EBITDA multiple. Notes: In the cases of Reebok and Nike, the denominator was substituted for (income before income taxes, minority interest and cumulative effect of the change in the accounting principle + interest expense – interest income. ) Book Value of debt was substituted for market value in the case of debt and preferred stock. (if preferred stock was applicable. )
EV / EBITDA Market Value of equity- Cash + Market Value of Debt + Market Value of Preferred Stock / (Sales-COGS-SGA) ADIDAS: (1, 081, 359 x 82. 3 ) – 75, 956 + 3, 179, 452/ 2, 245, 383 (Sales-COGS-SGA) are from the income statement MV of equity= Number of shares outstanding* the share price Cash= found on balance sheet MV (BV) of Debt= Balance sheet: Total Liabilities & equity- Total Value of Equity MV of preferred stock= preferred stock price* shares out preferred stock outstanding (if applicable)
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Analytical Tools n Du Pont Analysis n Index Analysis n Common Size Analysis n EV / EBITDA
Du Pont Analysis Return on equity = (ROE) Asset turnover * Net profit margin * leverage (NPM) (TATR) 1/(1 -DR) (Net profit/Equity) = (Net profit/Sales) * (Sales/Total assets) * (Total assets/Equity)
EV / EBITDA Market Value of equity- Cash + Market Value of Debt + Market Value of Preferred Stock / (Sales-COGS-SGA)
Outcome
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