Valuation of Pandora

Abstract

Pandora operates in the global jewelry industry, selling their items in more than 100 countries. Since 2010, the company has been listed on NASDAQ OMX Copenhagen Stock Exchange. The objective of this thesis is to perform a valuation of Pandora as of December 31st, 2021, in order to see if the estimated share price is aligned with the market price. In order to perform a valuation, a strategic and financial analysis will first be conducted. The strategic analysis revealed an expected growth of the global jewelry industry in the coming years, indicating continued revenue growth for the company. The analysis further presented threats in both the macro- and micro-environment of the company, such as the threats stemming from commodity price risks and the intensive rivalry within the jewelry industry. Apart from this, internal strengths were identified, such as the strong brand of Pandora. The financial statements of Pandora were reorganized for analytical purposes, based on which a profitability analysis and liquidity risk analysis was conducted. Increasing trends in Pandora’s ROIC and ROE are identified, and the liquidity of the company is assessed to be strong. The strategic and financial analysis provided the basis for the pro forma statements, based on which the free cash flows were calculated. Discounting the cash flows with the estimated WACC enabled a valuation to be performed using the discounted cash flow model. The estimated share price based on the assumptions made indicates a share price of DKK 909 as of December 31st, 2021.