Reference no: EM132850268

Question - XYZ Ltd is a family-based private company operating in the pharmaceuticals industry. XYZ's management is planning to expand its operations by raising capital through initial public offerings of 450,000 shares. As XYZ is currently unlisted, management doesn't know its current market price. As a first step of understanding XYZ's relative value, the management is seeking your advice on the matter. The management has considered the following five pharmaceuticals companies from 2019.

Company	Share Price	Shares Outstanding	Book Value	Sales revenue	R&D	Net Earnings
Wipe Corp	3.25	1,950,000	4,890,132	1,450,650	950,726	238,000
Kleen Inc	60.38	145,000	6,220,550	1,090,200	852,980	287,940
Sani Group	25.32	469,500	5,990,000	850,000	469,420	124,000
SA Group	105.29	24,500	589,400	1,650,232	1,150,000	153,920
Blue Crop	15.87	845,670	9,883,260	2,476,000	986,450	328,990
XYZ	?	?	6,750,550	1,500,650	975,000	468,955

Required - Using these numbers:

(i) Calculate relevant multiples.

(ii) Estimate a value for XYZ.

(iii) What should be the value per share of XYZ?

(iv) If XYZ management is hoping for the initial share price to be $35, should management continue with the initial public offering?

(v) What are the limitations of the analysis?