|
The purpose of this thesis is to study the corporate valuation based on the approach of
case study by using the theory of Discounted Cash Flow Model (DCF). The research adopts Sales Driven Flow Method and Earning Driven Flow Method to analyze the financial statements of Inventec Appliances Corp..(IAC) The research conclusions are drawn and summarized as follows.
1. Competitive industry results in lower gross profit margin
The business operation of IAC is to develop, to design to produce and to sale for consumer electronics and handheld devices. Due to the situation of low price rivalry among EMS competitors, such as Foxconn and Quanta, and the lower scale of production compared with EMS competitors, IAC is losing some orders. Therefore, the company should focus on niche products and provide service to brand name for small quantity orders.
2. Lower gross profit margin causes the difficulty in ROIC improvement
In the past five years, ROIC of IAC is only one year lower than its WACC based on the analysis of excess rate of return. By analyzing its ROIC, the results conclude that capital turnover ratio is high and gross profit margin is stable but low. Therefore, lower gross profit margin is the main reason causing the difficulty in ROIC improvement. In the past five years, ROIC of IAC is around 23%, so we consider it is Franchise Business.
3. Positive Earning of IAC
Analyzing Earnings, four indexes of earning evaluation are around +-0. This indicates that inventories, account receivable, sales gross profits and operation expenses are not expanded inappropriately. Cash flows from operating activities are greater than earnings after taxes for most years which show the earning of company is good.
4. Research results provide reference value
The research results indicate that the stock price is between 17.61 and 20.12 under the method of Sales Driven Flow and the stock price is between 36.64~37.05 under the method of Earning Driven Flow. The recent stock price of IAC is around 23. Compared with the result of Earning Driven Flow method, the result of Sales Driven Flow Method is more close to the recent stock price and provides reference value.
|