In 2017, BMC Software generated $465M of operating income (earnings
before interest and taxes) and $295M of net income from $2,200M of
sales. Over the next two years (2018 and 2019), the firm is projecting 10%
growth in operating income and 5% growth in depreciation expense.
Beginning in 2020, BMC estimates that free cash flows will grow 2%.
Assume the firm's effective tax rate is 30%, weighted average cost of
capital is 9%, and number of shares outstanding is 146M. Depreciation
expense for 2017 was $105M while capital expenditures were $55M.
Capital expenditures are expected to remain constant over the next 5
years. BMC expects working capital needs to increase by $20M per year.
Lastly, the firm has $250M in cash and cash equivalents and $750M of
interest-bearing debt.
In billions
Using IBM as a comparable firm, provide a valuation of the BMC Software's
equity per share basis based on EV/EBITDA. (Note: base your answer on
the 2017 financial since 2018 numbers are not known yet). What is BMC software Earnings Per Share? (1) 29.17 per share (2) 23.17 per share (3) 26.60 per share (4) 34.42 per share
In 2017, BMC Software generated $465M of operating income (earnings
before interest and taxes) and $295M of net income from $2,200M of
sales. Over the next two years (2018 and 2019), the firm is projecting 10%
growth in operating income and 5% growth in depreciation expense.
Beginning in 2020, BMC estimates that free cash flows will grow 2%.
Assume the firm's effective tax rate is 30%, weighted average cost of
capital is 9%, and number of shares outstanding is 146M. Depreciation
expense for 2017 was $105M while capital expenditures were $55M.
Capital expenditures are expected to remain constant over the next 5
years. BMC expects working capital needs to increase by $20M per year. Lastly, the firm has $250M in cash and cash equivalents and $750M of interest-bearing debt.
* in billions
MVE*
EBITDA*
Cash*
PPS
DEBT*
IBM
110
17
15
120
47
Hewlett-Packard (HP) 36
5
6
22
6
CA Technologies
19
1.25
3
45
3
Using IBM as a comparable firm, provide a valuation of the BMC Software's
equity per share basis based on EV/EBITDA. (Note: base your answer on
the 2017 financial since 2018 numbers are not known yet)