Valuecruncher has valued each David Jones share at $3.92 with a range between $2.77 and $5.12. The current share price $4.31.

Key Assumptions 

Revenue Growth

David Jones has been slowly rebuilding since the company was in dire straits in 2003. Although revenue growth has been slowing, EBIT margins have been on the rise and the profitability of the company has been improving since the implementation of their new business strategy in 2003. Revenue growth has decreased since the 03/04 period from 3.41% to 1.15% in the 05/06 period. We have forecasted growth to be 2% for the next three periods, which is the company’s average historical growth rate, and also the same growth that has been applied to the Kirkcaldie and Stains valuation.

EBIT Margins

EBIT margins have grown from -1.04% in 2003 to 8.02% in 2006. The annual report states that growth in profit after tax will be between 5-10% in 2007, corresponding to an average forecasted EBIT margin of 9% in 2007. We have forecasted margins to be 9% for 2007 and 10% for 2008 and 2009.

Discount Rate (WACC)

The discount rate applied is 11%.

Terminal Growth

Terminal growth is assumed to be 2%.

David Jones Valuation