Finance is Fun, LLC (FINANCE) is a startup in the educational enrichment space. Its platform creates an appealing environment for students to learn finance and generates its own materials and content. They are exploring strategic alternatives including capital raises, M&A, and other cash conservation strategies.
1. (18 points) Based on the following 3 comparable companies, what do you think would be FINANCE's IPO stock price if it decided to commence a public offering, and why? Your answer should be based on using a multiple of Revenue and a P/E (You must show your work.)
Annual Income Statement
(in thousands, except per share data)
Finance Is Fun, LLC
Revenue: $1,250.0
CoGS: $612.5
Gross Margin: $637.5
SG&A: $406.3
Depreciation: $112.5
Op Income: $118.8
Interest expense: $25.0
Pre-tax Income: $93.8
Taxes: $18.8
Net income: $75.0
I Can Do This, Inc.
Revenue: $1,050.0
CoGS: $2,700.0
Gross Margin: $6,480.0
SG&A: $488.7
Depreciation: $975.0
Op Income: $3,195.0
I Got This, Corp. Inc.
Revenue: $561.3
CoGS: $330.1
Gross Margin: $71.3
SG&A: $1,725.0
Depreciation: $1,140.0
Op Income: $356.3
Interest expense: $228.8
Pre-tax Income: $10.0
Taxes: $218.8
Net income: $34.3
Revenue
Finance Is Fun, LLC: $561.3
I Can Do This, Inc.: $1,725.0
I Got This, Corp. Inc.: $3,285.0
CoGS
Finance Is Fun, LLC: $330.1
I Can Do This, Inc.: $1,140.0
I Got This, Corp. Inc.: $2,137.5
Gross Margin
Finance Is Fun, LLC: $71.3
I Can Do This, Inc.: $356.3
I Got This, Corp. Inc.: $641.3
SG&A
Finance Is Fun, LLC: $228.8
I Can Do This, Inc.: $10.0
I Got This, Corp. Inc.: $506.3
Depreciation
Finance Is Fun, LLC: $10.0
I Can Do This, Inc.: $218.8
I Got This, Corp. Inc.: $101.3
Op Income
Finance Is Fun, LLC: $218.8
I Can Do This, Inc.: $34.3
I Got This, Corp. Inc.: $405.0
Interest expense
Finance Is Fun, LLC: $25.0
I Got This, Corp. Inc.: $99.4
Pre-tax Income
Finance Is Fun, LLC: $93.8
I Got This, Corp. Inc.: $184.4
Taxes
Finance Is Fun, LLC: $18.8
I Got This, Corp. Inc.: $24.9
Net income
Finance Is Fun, LLC: $75.0
I Got This, Corp. Inc.: $99.4
EPS
Finance Is Fun, LLC: $1.00
I Can Do This, Inc.: $0.80
I Got This, Corp. Inc.: $1.05
Common S/o
Finance Is Fun, LLC: 75.0
I Can Do This, Inc.: 125.0
I Got This, Corp. Inc.: 175.0
Stock Price
Finance Is Fun, LLC: $22.00
I Can Do This, Inc.: $18.25
I Got This, Corp. Inc.: $30.00
Balance Sheet
Cash
Finance Is Fun, LLC: $312.5
I Can Do This, Inc.: $750.0
I Got This, Corp. Inc.: $1,000.0
Debt
Finance Is Fun, LLC: $393.8
I Can Do This, Inc.: $1,000.0
I Got This, Corp. Inc.: $200.0
Multiple of Revenue = $26.40
P/E = $22.40