Valuation of Distressed Companies: A Case Study on Nordstrom Inc.

Kincses-Bogár Dániel Péter (2023) Valuation of Distressed Companies: A Case Study on Nordstrom Inc. Pénzügyi és Számviteli Kar.

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Absztrakt (kivonat)

In this thesis the concept of distress in a corporate context is explored and its effect on valuation. The study identified that financial distress manifests in various forms, ranging from the inability to meet financial obligations to a significant deterioration in market positioning. Distress is influenced by a range of internal and external factors, which is explored methodically, highlighting that distress can stem from financial mismanagement, operational inefficiencies, market dynamics, and external shocks, such as global health crises or political distruptions. A pivotal aspect of the study is the comprehensive evaluation of valuation methodologies suitable for distressed companies. Traditional methods, such as Discounted Cash Flow (DCF) and Comparable Company Analysis (CCA), and it’s assumptiona re presented and scrutinized for their applicability and limitations in the context of distress. Furthermore, the need for application and of these methods, considering the elevated risks and uncertainties in distressed firms. This involves adjusting the discount rates in DCF to account for increased risks and the potential challenges in projecting long-term viability. Key inputs in the DCF such as cash flow projections, discount rate, cost of equity, cost of debt, terminal value, perpetual growth rate and beta are presented an evaluated the context of distress. Furthermore, evaluating how complications in distressed firms, such as liabilities outweighing assets, affect traditional valuation metrics. A case study on Nordstrom Inc., an American retail giant experiencing a decline in financial performance, and a tight capital structure, due to questionable actions from managment a almost a decade ago, serves as the practical application of the theoretical frameworks discussed. The study applies the discounted cash flow valuation methodologies to Nordstrom, offering an in-depth analysis of the company's financial status and market positioning. This includes a detailed assessment of Nordstrom’s distress level, employing tools like the Altman Z-score, credit ratings, and a thorough examination of the company's financials and projected market trends. The Nordstrom case study is instrumental in demonstrating the practical challenges and considerations in valuing distressed companies, while successfully navigating through Nordstrom's complex financial landscape, providing a detailed understanding of the company's distress sources and their impact on valuation. This includes an analysis of Nordstrom’s revenue streams, cost structures, and market dynamics, culminating in an intrinsic valuation of the company. Following the assesment and projections of Nordstrom, an implied enterpise value and equity value is derived and benchmarked against current market levels. The conclusion reflects on the findings from the Nordstrom case study and the broader implications for the valuation of distressed companies. Lastly the study acknowledges the inherent complexities and uncertainties in this process and underscores the necessity for continuous monitoring and adaptation of valuation models to reflect changing market and company conditions. The thesis also recognizes the limitations of the study, such as reliance on historical financial data to predict future performance and the challenges in applying these valuation methods universally across different industr, sectors, and economies. As far as the valuation, this study concluded that the intrisic value of Nordstrom Inc’s common stock based on second quarter 2023 finanacils amounted to $13.14.

Intézmény

Budapesti Gazdasági Egyetem

Kar

Pénzügyi és Számviteli Kar

Tanszék

Pénzügy Tanszék

Tudományterület/tudományág

NEM RÉSZLETEZETT

Szak

Pénzügy és Számvitel

Mű típusa:	diplomadolgozat (NEM RÉSZLETEZETT)
Kulcsszavak:	corporate finance, DCF, distress, equity, Nordstrom, valuation
SWORD Depositor:	Archive User
Felhasználói azonosító szám (ID):	Archive User
Rekord készítés dátuma:	2024. Máj. 14. 08:11
Utolsó módosítás:	2024. Máj. 14. 08:11

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