Valuation Report on Bang & Olufsen

Andrea Notario Peñuelas

Student thesis: Master thesis


Bang & Olufsen (also known as B&O) is one of the biggest icons of design and quality electronics in Denmark throughout the past century. However, the most recent years of its history have not been the smoothest and since the Financial Crisis in 2008 B&O has been struggling to get back on its feet. In context of B&O’s recent history, the main goal of this thesis has been to analyze B&O with the purpose of valuating the company and, thus, estimating a share price as of the 1st of November, 2016. The valuation has been based on both qualitative as well as quantitative analyses using a wide range of well-established tools for corporate analysis. The main chapters of the thesis cover the topics of company presentation, strategic analysis, financial statement analysis, the valuation itself, sensitivity analysis and recommendations for further work. The strategic analysis covers two perspectives: an analysis of the external environment using the Nine Forces model (a combination of the PEST model and Porter’s Five Forces) and an analysis of each of the product lines in B&O using the BCG Matrix. The strategic analysis finds many threats in the external environment but also concludes that the recent measures taken by former CEO Tue Mantoni has put B&O in a good position to tackle the main threats in the environment. The financial statement analysis assesses the accounting quality and reorganizes in the income statement and balance sheet for the purpose of valuation. The analysis also examines the profitability of B&O using the DuPont model as well as the liquidity: B&O has been suffering with respect to both of these key concepts in recent years – e.g., the average profit margin of the last three financial years was -7.7%. Also, if B&O does not manage to make its free cash flow positive again, it will have a future liquidity problem. Based on an intrinsic valuation using Economic Value Added model, this thesis finds that the appropriate value of B&O’s stock is 83.22 DKK per share. The actual share price in the market on the 1st of November, 2016, was 74.5 DKK, which means that the suggested share price is approx. 11% higher than the market price. The EVA model was applied using a two-stage approach: a high-growth stage and a mature stage. The sensitivity analyses show that the estimated share price is rather sensitive to changes in the assumed stable growth rate (the rate by which B&O will grow in its mature stage) and the calculated WACCs of the high-growth period (9.63%) and the mature period (7.48%), respectively. However, despite the sensitivity to the underlying parameters, 83.22 DKK is believed to be the correct share price under the current circumstances.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
Publication date2016
Number of pages118