- 28 -
$67.31, and 40 percent for the capitalized future earnings value
of $64.47. His final value was $68.33 per share.
Court’s Analysis
We found Mr. Hitt’s analysis to be useful and largely
correct. However, we find that there was one error in Mr. Hitt’s
approach: the use of a lack of marketability discount in
calculating the P/E and P/Eqt ratio values. According to Mr.
Hitt, he did not rely on a comparison to publicly traded
companies in estimating the value of FNBW. Therefore, because
the comparable companies he chose to calculate P/E and P/Eqt
ratios were not publicly traded, their stock price presumably
also reflected a lack of marketability. Thus, to further
discount the value indicated by the comparison to nonpublicly
traded companies for lack of marketability was not appropriate.
If Mr. Hitt’s approach is adjusted to eliminate the lack of
marketability discount from the P/E ratio and P/Eqt ratio
methods, the following results are produced:
P/E value = $135.47 (.68 x $199.22)
P/Eqt value = $122.39 (.68 x $179.98)
The capitalized future earnings value of $64.47 is unaffected by
the elimination of a lack of marketability discount. Weighting
the adjusted values in the same manner as Mr. Hitt produces a
final value of $103 per share.
Page: Previous 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 NextLast modified: May 25, 2011