An Investment Analysis Report on Ideko Corporation

Advanced Corporate Finance
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Advanced Corporate Finance
An Investment Analysis Report on Ideko Corporation
Introduction
Ideko Corporation is a privately owned manufacturer and also the designer of sports eyewear situated in Chicago. June Wong is the founder of the company who made the decision to sell the business after having successfully relinquished the relevant management control strategies. The total number of assets in the firm are close to $867 million, with yearly sales of about $75 million, all of which clearly depict that the corporation is profitable with a net profit of 9.3%. Being among the KKP investment partners, there is much investigation being carried out in order to determine if a particular deal can be reached and acquisition takes place at the end of a fiscal year. As such, there is an immense plan to facilitate the implementation of various financial and operational improvements at the Ideko corporation in the future, an idea that intends to sell the business. Additionally, it is crucial to estimate Ideko's corporation value based on other comparable firms and the building of various financial models that are essential in projecting cash flows that majorly reflect the operation improvements within the company. Forecasts of cash flows enable individuals to value the firm using the relevant APV model discussed in the previous chapters. The exploration of the importance of various valuation estimates relating to the main assumption in this case study is also crucial to ensuring an effective investment analysis report of the Ideko corporation.
Valuation Methods
i)Comparable Company Analysis (CCA)
Comparable Company Analysis is utilized in the evaluation of the value of a company using metrics of other relevant businesses of a particular size though in the same industry. As such, most analysts usually combine a list of statistics related to the companies being calculated and reviewed, thus considering various valuation multiples to effectively compare them (Pinto,2020).
As for this case, the best way to compare the effectiveness of the proposed price of Ideko is to relate it to other publicly traded companies using the comparable firm's method. It is much easier to compare Ideko with other companies in a similar business line despite the fact that there is no other company that is exactly similar to it. The closest competitors to the Ideko firm include the Nike Inc. company, the Luxottica group, and the Oakley company, all of which also design sports eyewear. A close evaluation of the firm in the sporting group industry is illustrated in the Table below:
Ideko’s Financial Performance in the Mid 2005
Ratios

Ideko

Luxottica Group

Nike Company

Oakley Company

Sporting Goods Industry

EV/Sales

2.0x

2.7x

1.5x

2.0x

1.4x

P/E

21.6x

28.0x

18.2x

24.8x

20.3x

EV/EBITDA

9.1x

11.6x

9.3x

11.6x

11.4x

EBITDA/sales

21.7%

17.0%

15.9%

17.0%

12.1%

The Table illustrates each company's enterprise value in comparison to th...