Question

Consider the following data:

Company Name	Market Capitalization	Enterprise Value​ (EV)	​EV/Sales	​EV/EBITDA	​EV/EBIT	​P/E	Forward​ P/E	Total Shares
Alaska Air​ (ALK)	​7,286	​8,207	1.02x	5.1x	6.7x	7.7x	12.5x	124124
Peer Data
American Airlines​ (AAL)	​17,879	​37,327	0.87x	5.7x	8.2x	10.5x	8.2x
Delta Air Lines​ (DAL)	​35,580	​44,164	1.02x	5.7x	8.0x	10.8x	8.8x
Hawaiian​ (HA)	​2,023	​2,057	0.73x	3.4x	4.1x	5.8x	7.2x
JetBlue Airways​ (JBLU)	​5,450	​5,814	0.80x	4.1x	5.9x	4.9x	10.8x
SkyWest​ (SKYW)	​2,909	​5,040	1.56x	7.2x	12.6x	6.6x	11.8x
Southwest Airlines​ (LUV)	​30,318	​30,691	1.44x	6.9x	8.9x	8.6x	12.3x
United Continental​ (UAL)	​21,961	​31,393	0.80x	5.7x	9.2x	11.4x	9.3x

for the airline industry for July 2018. ​(EV equals=enterprise value,

Book=equity book​ value). Suppose Alaska Air​ (ALK) has 124 million shares outstanding. Estimate Alaska​ Air's share value using each of the five valuation​ multiples, based on the median valuation multiple of the other seven airlines shown.

Calculate Alaska​ Air's share values using each of the five valuation multiples​ below:  ​(Round the median to two decimal places. Round the share price to the nearest cent. Round the EV and market cap to the nearest​ integer.)

		EV/Sales
Alaska Air		1.0
Median (without ALK)
Implied EV	$
Implied market cap	$
Implied share price	$

Answer 1

Median is calculated using MEDIAN function in Excel

Implied EV (for first 3 multiples)  = Median ratio * denominator of ratio

denominator = EV / (EV / actual ratio of ALK)

Implied market cap (for first 3 multiples)  = Implied EV - (Acutal EV - Actual market cap)

PE ratio = price per share / EPS

Implied price per share (for first 2 multiples)  = Median ratio * actual EPS

price per share = market cap / shares outstanding

actual EPS = (actual market cap / shares outstanding) / actual ratio

Implied market cap = Implied price per share * shares outstanding

Implied EV = Implied market cap + (Acutal EV - Actual market cap)