In accordance with the assignment guidelines outlined in the student handbook marks will be awarded for the student`s ability to:
Scenario:
Sainsburys plc has had a mixed financial performance over recent years. The food retail supermarkets in the UK have come under increasing pressure from a number of successful discounters. Sainsburys have also recently acquired Home Retail Group for £1.4 bn.
Their recent financial results show that their sales are down marginally on the previous year, as are dividends per share (2015/16: 12.1p; 2014/15: 13.2p) and earnings per share (2015/16: 24.2p; 2014/15: 26.4p). This information is derived from Sainsburys own reported figures and may differ from other reported financial data. Their share price is at present around 232.4p, and the highest recorded price over the previous twelve months was 292.5p. Sainsburys has a market capitalisation of £5,056.26m as at 29/11/2016 and its shares are traded on the FTSE All-Share, FTSE 350 High Yield, FTSE 350, FTSE All-Share (ex IT), FTSE 350 (ex IT) and the FTSE 100.
Required:
You are required to provide a variety (at least five) of possible share valuations for Sainsburys plc as at the end of February 2017 for an existing investor in a small number ofshares, and provide a critical evaluation of each equity valuation method used in terms of theoretical soundness and practicality.
Your conclusion should advise the investor whether they should continue to hold the shares, sell the shares, or buy more with brief reasons.
It is likely that you will need to analyse the recent financial performance of Sainsburys plc in order to perform yourvaluations. Your analysis should include ratios suitable for the investor you are advising and marks will be awarded for the relevancy of the ratios selected, and their interpretation, rather than their calculation.
Demonstrate a comprehensive understanding of the theories of corporate finance, and evaluate the practical application of those theories;