Strategic Analysis and Valuation of PANDORA A/S

Daniel Minxin Wang

Student thesis: Master thesis


Since PANDORA were listed on NASDAQ OMX, the stock price has been rising sharply generating big returns for both the private and institutional investors. PANDORA have been granting extremely favorable stock options to the management team and employees causing huge share based payments. An interesting approach in this master’s thesis is to examine whether the share based payments have an influence on the incredible growth in the stock price of PANDORA. Hence, by applying a fundamental analysis this thesis challenges the observed market price of each PANDORA share. The strategic analysis is the foundation of forecasting the future earnings of PANDORA. A strategic analysis constitutes of three layers examining the business environment on respectively macro, industry, and company level. Based on the findings in this thesis, the PANDORA brand is the only sustainable competitive advantage. The expected short and long term prospects of PANDORA in terms of revenue growth indicate a declining tendency. The Asian market is likely to be the main driver of future growth in PANDORA due to the fierce competition in established markets such as Northern America and Western Europe. The general outlook of the other value drivers such as the profit margin and asset turnover is expected to decrease as well. In order to valuate PANDORA, a present value approach is used. In this thesis, the discounted Cash Flow (DCF) model is perceived as the correct approach to estimate the market value of equity. Future earnings are adjusted for time and risk. The relevant discount rate is perceived as the Weighted Average Cost of Capital (WACC) under the prerequisite that the long term WACC is constant. The theoretical fair value of equity is estimated to be 67.734,40 million DKK corresponding to 578,64 DKK per share. In comparison with the observed market price of each PANDORA share closing at 708,50 DKK on 24.04.17, the estimated fair value indicates that the PANDORA share may currently be overvalued. In the sensitivity analysis, it appears that the shared based payments (later termed as DCL) does not have a significant influence on the share price. DCL is estimated to be 528 million DKK in 2016 which only affects the estimated share price by 4,51 DKK. Finally, the underlying hypothesis whether share based payments have an effect on the share price is thus rejected due to the minimal influence from DCL

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2017
Number of pages127