Tiffany & Co’s Analysis

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Tiffany & Co. is a holding corporation operated by its parent, (the "Company"). Tiffany and Co.,

the largest subsidiary, is a jeweler and specialty distributor, with a wide variety of jewelry (93%

of net sales during fiscal 2015) as well as timepieces, china, crystal, stationery products,

fragrances and accessories in its product portfolio. The company undertakes product creation,

sourcing, and retail operations through Tiffany and Company and other subsidiaries. Tiffany is

well known for creating and exporting luxury accessories like diamonds, colorful gemstones, and

fragrances. Tiffany said that she was a taste and style arbiter and is recognized in popular culture.

'A-' from Fitch and 'BBB+' are allocated to Tiffany & Co.'s corporate ranking, which represents

Tiffany's good position. The remaining net shares are 126,04 thousand and the total sales in 2015

are 4130 thousand.

RF Beta Expected Country Equity Risk Cost of

Market Premium Premium Equity
1.86% 1.05 9.49% 7.63% 8.01% 9.87%

Volume Note Rate Weight Cost WACC 8.80%

Short term 305.8 0.81% 0.22% Re 9.84%
Debt
Long term 789.1 1.86% 1.34%
Debt
Total Debt 1103.9

Effective Pretax Cost of Debt Adjusted

Tax debt Factor
35% 1.57% 1.48%
Cost of 1.42%
Debt

The company's WACC should hit 8.8% as measured and the Cost of Owners Eq. should be

9.84%. In the next table, the FCFF and DCF models are used to measure Tiffany & Co's

intended inventory price. We use the following format and model:

 FCFF = EBIT*(1-T) + Depreciation + CapEX + (Change in) OCA + (Change in) OCL

Year 2020 2021 2022 2023 2024 2025

Income statement

Sales 2,000 2165 2343.61 2536.96 2746.26 2972.82

3 1 6
Costs of goods sold -1,120 -1212.4 - -1420.7 - -
1312.42 1537.91 1664.78
Selling, general, & administration -300 -324.75 - - - -
expenses 351.542 380.544 411.939 445.924
Depreciation -153 - - - - -
165.623 179.286 194.077 210.089 227.421
Operating profit 427 462.227 500.361 541.641 586.326 634.698
5 3 1 5 4
Interest payments on debt -30 -32.475 - - - -
35.1542 38.0544 41.1939 44.5924
Interest earned on short term 2 2.165 2.34361 2.53696 2.74626 2.97282
investments 3 1 6
Earnings before tax 399 431.917 467.550 506.123 547.878 593.078
5 7 6 8 8
Taxes -140 -151.55 - - - -
164.053 177.587 192.238 208.098
Earnings after tax 259 280.367 303.497 328.536 355.640 384.981
5 8 4 6
Dividends -104 -112.58 - - - -
121.868 131.922 142.806 154.587
Retained earnings 156 168.87 182.801 197.882 214.208 231.880
8 9 3 4

Balance sheet

Cash 316 342.07 370.290 400.839 433.909 469.706

8 8 5
Short term investments 100 108.25 117.180 126.848 137.313 148.641
6 3
Account receivable 1,300 1407.25 1523.34 1649.02 1785.06 1932.33
8 4 9 7
Inventory 560 606.2 656.211 710.348 768.952 832.391
5 9 7 3
Current assets 2,276 2463.77 2667.03 2887.06 3125.24 3383.07
1 1 4 6
Fixed assets

At cost 2,000 2165 2343.61 2536.96 2746.26 2972.82

3 1 6
Depreciation -850 - - - - -
920.125 996.035 1078.21 1167.16 1263.45
Net fixed assets 1,150 1244.87 1347.57 1458.75 1579.09 1709.37
5 7 2 9 5
Total assets 3,426 3708.64 4014.60 4345.81 4704.34 5092.45
5 8 3 3 1

Account payable 470 508.775 550.748 596.185 645.371 698.614

9 7 2
Short-term debt 200 216.5 234.361 253.696 274.626 297.282
3 1 6
Other current liabilities 300 324.75 351.541 380.544 411.939 445.923
9 1 9
Current liabilities 971 1051.10 1137.82 1231.69 1333.30 1443.30
8 4 4 9 7
Debt 300 324.75 351.541 380.544 411.939 445.923
9 1 9
Stock 1,000 1082.5 1171.80 1268.48 1373.13 1486.41
6 3
Accumulated retained earnings 1,155 1250.28 1353.43 1465.09 1585.96 1716.80
8 6 5 5 7
Total liabilities and equity 3,426 3708.64 4014.60 4345.81 4704.34 5092.45
5 8 3 3 1

Projected Free Cash Flow to Firm 2020 2021 2022 2023 2024 2025

EBIT(1-T) 277 280.746 303.908 328.980 356.121 385.501

4 4 2 2
Depreciation 153 165.622 179.286 194.077 210.088 227.421
5 4 5 9 2
CapEx=change in net fixed -165 -260 -282 -305 -330 -358
assets+depreciation
D OCA -154 - - - - -
166.936 180.959 196.159 212.637 230.498
D OCL 64 69.376 75.2035 81.5206 88.3684 95.7913
8 9 2 7
FCFF 88.3113 95.4507 103.166 111.506 120.518
8 2 8 1 9
Terminal Value 2832.19
 5
FCFF+TV 88.3113 95.4507 103.166 111.506 2952.71
8 2 8 1 4
81.4680 81.2307 80.9938 80.7572 1972.76
6 9 4 3 3
Enterprise value (value of operation) 2472.21
3

We then use the WACC and Re to Discount back the FCFF and FCFE by 2020.

EV/EBITDA Valuation
Comparable Ratio 13.08
TIF EBITDA 880.00
Enterprise Value 11,510.40
Cash 316.00
Debt (2,271.00)
Market Value 9,555.40
Outstanding share 121.00
Estimated Share Price 78.97

EV/EPS Valuation
Comparable Ratio 18.13
TIF EPS 4.45
Estimated Share 80.678
Price 5

EV/SalesValation

Comparable Ratio 2.07

TIF EBTDA 2,000.00

Enterprise Value 4,140.00

Cash 316.00

Debt (2,271.00)

Market Value 2,185.00

Outstanding share 121.00
Estimated Share
Price 18.06

EV/EBITDA 78.97 50% 39.49

Valuation
EV/EPS Valuation 80.6785 40% 32.27
EV/Sales Valuation 18.06 10% 1.81
Weighted Average 73.56$