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$400,000, then Ms. Walker’s forecasted earnings value would have
been approximately $315 per share, approximately $103 per share
higher than the value in her original report. We note that these
values are quite close to the $303 guideline company value set
forth in Mr. Schroeder’s report.
Choice of Multiples
When Ms. Walker applied the guideline public company method
to Demco’s historical performance measures, she did not use the
multiples of all seven companies she had identified as
comparable. Instead, she consistently chose a multiple
determined by reference to the two or three companies with the
lowest multiples, as shown in the following table.
Mean Multiple of
the Comparable Multiple Used by
Measure Companies Ms. Walker
1991 EBIT 10.1 8.2
1987-91 EBIT 7.3 6.5
1991 EBDIT 7.7 5.0
1987-91 EBDIT 7.5 4.7
1991 DFNI 13.6 13.0
1987-91 DFNI 11.7 9.5
1991 DFCF 8.8 6.5
1987-91 DFCF 7.0 6.4
BVIC 1.19 1.25
Ms. Walker justified her disregard of most of the comparable
companies’ multiples by referring to the decline in Demco’s
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