Valuation Approach for GlobalWear Corp

Very Hard Equity Valuation Applications Market-based Valuation

GlobalWear Corp is a leading retail company specializing in outdoor apparel. As part of its annual valuation assessment, financial analysts are looking to apply market-based valuation techniques. The company has a current stock price of $75 per share and earnings per share (EPS) of $5. Industry peers have an average Price-to-Earnings (P/E) ratio of 15. Additionally, GlobalWear Corp has a consistent dividend payout and the current dividend is $2.50 per share. Given this information, analysts must determine the most appropriate adjustment to the company's valuation based on its growth prospects and market conditions.

The analysts recognize that GlobalWear Corp is expected to grow its EPS at a rate of 10% annually for the next five years and thereafter stabilize at a perpetual growth rate of 3%. Considering these factors, they must decide which market valuation multiple is most relevant for projecting the company’s value.

Using a market-based P/E ratio adjusted for growth, the valuation should be applied on the forecasted EPS.

Using a dividend discount model (DDM) with the current dividend and expected growth rate, the valuation should be based solely on dividends.

Using an adjusted P/E ratio that includes both current earnings and future growth potential, while factoring in market volatility.

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