Discounted Cash Flow and Football Field Analysis

Topics: Discounted cash flow Pages: 18 (835 words) Published: November 3, 2015
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%
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