Valuation of Coloplast A/S: A Strategic and Financial Analysis and DCF Valuation

Maria Thalmann

Student thesis: Master thesis

Abstract

This thesis aims to estimate the value of Coloplast A/S on November 1, 2018 from an outsider perspective based on strategic and financial analyses and a DCF valuation. Additionally, it investigates how forecasted value drivers and valuation assumptions affects the estimated value and help explain the difference between this and the actual market value.
A PEST analysis, Porter’s Five Forces analysis, Value Chain analysis and SWOT analysis are performed in order to identify key opportunities, threats, strength and weaknesses that determine Coloplast’s future prospect. Moreover, a growth and common-size analysis as well as a Dupont profitability analysis and an examination of the impact of a new high-volume production facility in Costa Rica is performed. This includes extensive benchmarking with competitors.
Key growth, cost, investment and financing value drivers are forecasted based on the strategic and financial analysis resulting in the forecasted income statement, balance sheet and cash flow statement for Coloplast. These are, together with a mainly theoretically estimated WACC, used in the DCF valuation to estimate the value of Coloplast. This estimated value is DKK 639.2 per share, which is DKK 46.8 higher than the actual market value of DKK 592.4 on November 1, 2018.
An assessment of the forecast and valuation, including a multiple analysis, finds that the forecast is not unrealistic based on key value drivers, margins and ratios, when considering the strategic and financial analyses and the multiples relative to competitors. Further, a sensitivity analysis and scenario analyses find that investors might not believe Coloplast to have as high growth rates or EBITDA margins due to the lower actual value. Nevertheless, a more likely scenario is that the estimated WACC is too low. This could, in part, be explained by the announcement of a new CEO, which might increase the required return on equity for investors. The too low WACC estimate, indicates that the forecast assumptions are actually too pessimistic as using a higher WACC, estimated by Coloplast or analysts, results in an estimated value below the actual market value. Subsequently, investors might expect higher growth rates or EBITDA margins than this thesis but also a higher WACC.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2019
Number of pages75