Strategic Analysis & Valuation of Bang & Olufsen

Hummad Nadeem Alvi

Student thesis: Master thesis

Abstract

The purpose of this thesis is to determine the fair value of a Bang & Olufsen stock as of October 25th 2016 and identify the significant value drivers. The valuation is conducted based on a fundamental analysis of B&O of a strategic and a financial analysis. B&O operates in the business areas B2C and B2B, however their focus for the future lies on the B2C unit. A complete re-organization of the firm is part of a newly introduced strategy, Leaner, Faster, Stronger, which was introduced in 2011. The strategic analysis consists of 3 levels, a macro-, industry-, and internal environmental analysis. The analysis reveals that B&O is heavily affected by changes in the global economy and technology. The rapid evolution in technology and consumer behavior indicates that B&O will suffer injuries on their sales due to their slow product launches and long lasting products. The BRIC region is seen to experience a large growth in the future. A financial statement analysis was conducted, and illustrated that B&O have experienced positive and negative trends in the past years. They are still having issues with regards to an acceptable performance. Furthermore the analysis illustrated that the profit margin is a crucial factor for B&O’s operating performance. A DCF valuation was performed in order to forecast three different scenarios. The base case estimated the stock price at DKK 53.27. The best and worst case estimated a stock price at DKK 67.60 and 4.71. The result indicates that the market has overvalued the stock price. These results are supported in the brand valuation where the share price is estimated at DKK 43.32. The thesis concludes with a sensitivity analysis based on the base case scenario, illustrating how sensitive the share price is with regards to Weighted Average Cost of Capital and terminal growth. These findings supported the estimated share price at DKK 53.27 as of October 25, 2016, which represents B&O’s true value.

EducationsMSc in Applied Economics and Finance, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2016
Number of pages77