Valuation of Norwegian Air Shuttle ASA

Gøran Hosen & Matias Berg Bollingmo

Student thesis: Master thesis


The problem statement of this thesis is: “What is the fair value of Norwegian Air Shuttle ASA per 31.03.2013?” Based on the findings in this paper, we have estimated the value of Norwegian Air Shuttle ASAs equity to 8 633 billion NOK per 31.03.2013, which is the equivalent to a stock price of 246 NOK. We thereby claim that the stock is undervalued, as the actual stock price per 31.03.2013 is NOK 212,40. Our recommendation is therefore to buy the stock. In order to answer the problem statement, our main focus has been on a fundamental valuation of the company. The strategic analysis has laid the foundation for predicting the future development of the company and its environment. We have acquired valuable information by conducting a comprehensive analysis of Norwegian’s external and internal conditions. We have evaluated Norwegian’s key resources, and are of the opinion that the company is in possession of distinct competitive advantages. In addition to the strategic analysis, we have performed a financial analysis of Norwegian’s historical income statement and balance sheet. The financial analysis depicts a company that has proven to be very profitable while experiencing rapid growth. The financial strength of Norwegian is however somewhat weakened by mediocre liquidity and a fairly low equity share. The paper also includes a thorough discussion of the cost of capital. With a cost of equity and debt of respectively 8,39 and 7,9 %, the WACC is set to 6,77 %. By combining the findings of our different analyses, we have estimated future cash flows for Norwegian. We have used the FCFF-method, as we believe this will give us the most accurate results. To underline the uncertainties in our estimations, we have conducted a sensitivity analysis. Finally, a multiple analysis has been conducted in order to verify the results found in the fundamental valuation.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2013
Number of pages156