Dover Corporation Presented by Greysi Burroughs Rena Huynh Helen Tse.

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Presentation transcript:

Dover Corporation Presented by Greysi Burroughs Rena Huynh Helen Tse

Agenda  Company Overview – Rena  Financial Statement Analysis – Greysi  Firm Riskiness – Helen  Beta – Helen  Cost of Equity – Rena  Firm Valuation  Discount Dividend Model (DDM) – Greysi  Free Cash Flow Model (FCFM) – Helen  Multiples (P/E ratio) – Rena  Final Valuation and Recommendations – Greysi

Company Overview Brief History  Founded: 1955  HQ: Downers Grove, Illinois  Diversified Global Manufacturer  Volume: > $8 Billion  Exchange: NYSE under “DOV”

Company Overview 4 Major Operating Segments  Industry-leading product innovation Providing innovative products & solutions that serve drilling, production and downstream markets 1. Global pump & fluid handling markets 2. Refrigeration systems Provides integrated printing, coding, identification equipment Provide acoustic components for consumer electric markets *serves life sciences, aerospace, & telecom markets

Financial Statement Analysis Liquidity Ratios Dover Corp Industry Current Ratio2.82x2.73x2.60x1.2x Quick Ratio2.16x 2.01x0.9x Asset Management Ratios Dover Corp Industry Inventory Turnover 9.9x10.09x9.36x5.8x Day Sales Outstanding 55 days56 days60 daysN/A Fixed Asset Turnover 7.94x8.45x6.45xN/A Total Asset Turnover 0.84x0.76x0.68x0.6x

Profitability Ratios Market Value Ratios Debt Management Ratios Dover Corp Industry Total Debt48%47%48%N/A Interest Coverage10.47x9.48x5.88x6.8x Dover Corp Industry Profit Margin11.26%10.54%6.67%8.79% Return on Assets9.42%8.18%4.52%5.1% Return on Equity18.16%15.47%8.73%14.67% Dover Corp Industry Price Earnings11.72x14.86x20.3x21x Market to Book2.13x2.3x1.77x2.55x Financial Statement Analysis

Firm Riskiness  Economic conditions and uncertainties  Competitive environment  Advanced technology  Increased price/unavailability of raw materials  Litigations  Foreign operations

Beta  Dover’s computed beta: 1.4  (Yahoo Finance) Dover beta: 1.5  Our beta will be used in the Capital Asset Pricing Model that will help calculate the expected return of Dover.

Cost of Equity

Valuation: Dividend Discount Model Assumptions  Non-constant growth rate: 12.8%  Constant growth rate: 5.5%  Cost of equity: 9.89% Valuation for December 2011: $50.45 Stock Price as of 12/31/11: $56.51 per share

Valuation: FCFM Assumptions  Based on past 3 years (2011, 2010, 2009)  Created pro forma financial statement for next 10 years  Forecasted unlevered free cash flow  Dover’s value was estimated to be $ per share  In comparison to $56.51 per share on December 2011

Valuation: Multiples Stock Price as of 12/31/11: $56.51 per share  Method 1:  Valuation = $54.04  Method 2:  Valuation = $65.14  Method 3:  Valuation = $140.32

Final Valuation Estimate and Recommendation Dover’s value estimate for 12/11 is $56.54 per share  Stock price on 12/31/11 was $56.51 per share Average of – DDM: $50.45 per share – Valuation by Multiples Method 1: $54.04 per share – Method 2: $65.14 per share Recommendation: BUY!!!

Questions???