Valuation of Marel

Stefán Tómas Franklín

Student thesis: Master thesis


This thesis performs a valuation of Marel in order to determine the fair value of one Marel share on the 17th of February 2020. Marel is the largest company on the Nasdaq Iceland and a global leader as a manufacturer and supplier to the food processing industry.
To gain insight into the company´s organizational environment, a strategic analysis was conducted. The strategic analysis explored the internal and external environment of Marel. First, the macro environment of Marel was analyzed to find the external factors that affect the company. Then, the industry in which Marel operates was explored and analyzed. To conclude the strategic analysis, a SWOT analysis was carried out.
Following the strategic analysis, a financial analysis was performed to evaluate the company´s historical financial performance and profitability. The financial analysis measured Marel´s profitability and liquidity risk, and the findings were used to create a forecast of Marel´s cash flows. Following the forecast, the terminal growth rate was estimated, and the weighted average cost of capital was calculated to discount the estimated cash flows.
The valuation was conducted by using the Discounted Cash Flow Model and the Economic Value Added Model. By using both models, the resulting fair value of one Marel share was calculated to be EUR 4.06. The result shows that the closing market price of 4.26 is 5% higher than the calculated price, indicating that Marel shares are overvalued on the market.
To determine how Marel shares were priced on the market compared to their peers, a relative valuation was performed. The relative valuation showed that Marel shares are traded at a premium over their peers, and the premium should have been lower according to the results of the valuation. The final part of the paper is a sensitivity analysis, that tested the sensitivity in the share price by changing the estimated growth rate and the cost of capital. The results of the sensitivity analysis show that the share price is sensitive to changes in both factors, but slightly more to the change in the cost of capital.
The conclusion of this paper is that the share price of 4.26 as of the 17th of February 2020 is overpriced as supported by the company valuation and peer multiples.

EducationsMSc in Finance and Investments, (Graduate Programme) Final Thesis
Publication date2020
Number of pages73