Hennes and Mauritz (H&M)

: equity valuation

Abstract

Purpose: The focus of this thesis is on equity valuation and on the different methodologies that can be used to value companies. The final purpose is to estimate the value per share of H&M and give an investment recommendation based on the results achieved. Method: In order to obtain H&M share price, three different approaches were applied. Firstly, the Discounted Cash Flow (DCF) with the discount rate equal to the cost of equity (Ke). The Trading Multiples were also used, a peer group based on cluster analysis was considered. Finally, given that H&M distributes dividends in a regular basis we also perform the Dividend Discount Model (DDM). Each valuation technique yielded different share prices. However we considered the DCF being the most reliable and complete approach to evaluate if H&M share price is under or overvalued. Results: The target price obtained through the DCF valuation was 369, 4 SEK. The valuation results were subject to a sensitivity analysis and were compared with the results obtained from the investment bank JPMorgan. We concluded that H&M share price was undervalued.

Date of Award	3 Nov 2015
Original language	English
Awarding Institution	Universidade Católica Portuguesa
Supervisor	José Carlos Tudela Martins (Supervisor)