Sears Essay

17404 Words Apr 11th, 2016 70 Pages
Sears, Roebuck & Co
G5 Investment Group
Matt Nutsch
Renis Kacani
Melody Seely
Ashley Green
Wiley Eagle
.

G5 Investment Group

December 4, 2004
Retail – Broadline

Buy
Stock Data
Price (52 weeks)
Symbol/Exchange
Beta
Fully Diluted Shrs
Average Daily Vol
Current market cap Book Value / Share
Current ratio

$31.21 - $55.90
S / NYSE
1.3
230.4 million
5,028,000 shrs
10.82B
$28.3
1.32

Valuation (per share)
Current Price
Comparables
DCF Analysis
Residual Income
DD Analysis
Abnormal Earnings

$34.78
$36.60
$36.94
$38.38
$27.97
$46.49

Summary Financials (in millions) for 2004
Revenue
Earnings

$36.6 billion
$550 million

1

Executive Summary
Sears is following a differentiated
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They report information on a quarterly basis. Sears’ fiscal year ends on December 31st. As a publicly held corporation they publish 10Q quarterly statements and 10K annual statements are in accordance with SEC regulations.
We have analyzed Sears using three categories of ratios: liquidity, profitability, and capital structure. In the liquidity section we calculated the current ratio, quick asset ratio, receivables turnover, inventory turnover, and working capital.
In the profitability section we calculated gross profit margin, operating expense ratio, net profit margin, asset turnover ratio, return on assets, and return on equity. In the capital structure section we calculated debt to equity ratio, times interest earned, and debt service margin.

2

We valuated the company based upon five valuation models. Those models were the Method of Comparables approach, the Residual Income Method, the
Discounted Dividends Model, the Free Cash Flows Model, and the Abnormal
Earnings Growth. Based upon all of these valuation methods except the
Discounted Dividends Model, we have determined that the company is undervalued. Thus we recommend Sears as a buy as current price is undervalued to our predictions based on the valuation methods. These valuations methods were performed using data from November 1st of 2004.
On November 17th K-Mart, one Sears main competitors, announced that it is going to buy Sears Roebuck & Co. for $11 billion. Immediately prior to

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