Equity valuation : OdontoPrev : how much is a smile worth?

• Autor(a) principal: Oliveira, Pedro Miguel Costa
• Data de Publicação: 2015
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10400.14/20028
• topic: Domínio/Área Científica::Ciências Sociais::Economia e Gestão

The aim of this master thesis is to calculate the most accurate price per share of OdontoPrev (ODPV3) on the 31st of December 2015. To perform that, a review of the related literature is carried out to realize that the Discounted Cash Flow valuation model, using the Cost of Equity as a discount rate, is the most suitable method to value the company. After discounting the free cash flows to equity, the result is a market capitalization of R$ 5,550 million, correspondent to a price per share of R$ 10.45. Besides that, the relative valuation (multiples) approach is also used to confirm the accuracy of the price per share under the discounted cash flow valuation, which displays an upside potential of 6.7% when compared with the share traded on the 28th of August 2015 – R$ 9.79. This makes it believable that OdontoPrev is being slightly undervalued by the market, making it a good opportunity to hold the investment. A “Hold” recommendation is the result of the assumptions on the future growth prospects of the company, taking into consideration that macroeconomic events occurring in emerging markets (i.e. Brazil) may have significant impact on the valuation.