Use the DCF Model to Value the Company of NEXT

Research Article
Open access

Use the DCF Model to Value the Company of NEXT

Jiawen Gao 1*
  • 1 The university of Manchester    
  • *corresponding author jiawen.gao-2@student.manchester.ac.uk
Published on 13 September 2023 | https://doi.org/10.54254/2754-1169/26/20230586
AEMPS Vol.26
ISSN (Print): 2754-1177
ISSN (Online): 2754-1169
ISBN (Print): 978-1-915371-95-9
ISBN (Online): 978-1-915371-96-6

Abstract

NEXT is a very common large clothing company in Britain, whose clothes are deeply in the hearts of contemporary young people. In the valuation of NEXT Company, the author found the formula of financial statements and selected a lot of useful data, and the DCF model was adopted. A variety of company data and many factors can affect the valuation results. So, many Excel sheets need to be created to summarize and calculate all this data. The final estimated market value is about 14.15 billion, while the actual market value is 8.66 billion. So, the results differ from NEXT's internal estimates, but the overall trend is similar. There are many reasons for this difference, involving some disadvantages of the DCF model and valuation problems. This paper enabled people to: have a certain understanding of the market development trend; learn a lot of valuation methods and become proficient in using them; more clearly understand the advantages and disadvantages of the DCF model; and have a more accurate understanding of the NEXT Company.

Keywords:

NEXT, DCF model, financial statements, enterprise value

Gao,J. (2023). Use the DCF Model to Value the Company of NEXT. Advances in Economics, Management and Political Sciences,26,286-294.
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References

[1]. Hoffmann, N. (2013), Discounted Cash Flow Valuation for Small Cap M&A Integration. Journal of Applied Corporate Finance, 25: 116-121.

[2]. Cuninghame-Green, R. A. (1965). Discounted Cash Flow. OR, 16(2), 251–253.

[3]. Data Source, NEXT Pcl. Retrieved from: https://www.nextplc.co.uk/investors/reports-and-presentations/2021-22

[4]. Data Source, Statista. Retrieved from: https://www.statista.com/statistics/885750/average-risk-free-rate-united-kingdom/

[5]. BVWire-UK. (2021). What market risk and risk-free rates are your UK peers using now? Retrieved from: https://www.bvresources.com/articles/bvwire-uk/what-market-risk-and-risk-free-rates-are-your-uk-peers-using-now#:~:text=The%20average%20market%20risk%20premium%20UK%20analysts%20use,rate%20reported%20by%20valuation%20professionals%20in%20the%20U.S.

[6]. Macrotrends LLC. (2020-2023). U.K. Inflation Rate 1960-2023, Retrieved from: https://www.macrotrends.net/countries/GBR/united-kingdom/inflation-rate-cpi#:~:text=Inflation%20as%20measured%20by%20the%20consumer%20price%20index,2021%20was%202.52%25%2C%20a%201.53%25%20increase%20from%202020

[7]. ZHONG, K., WANG, F., & NING, Y. (2016). Implications of Deferred Revenue Changes for Future Financial Performance and Market Underreaction. Quarterly Journal of Finance and Accounting, 54(3–4), 65–100.

[8]. Gallinger, G. W., & Ifflander, A. J. (1986). Monitoring Accounts Receivable Using Variance Analysis. Financial Management, 15(4), 69–76.

[9]. Gentry, J. A., & De La Garza, J. M. (1985). A Generalized Model for Monitoring Accounts Receivable. Financial Management, 14(4), 28–38.

[10]. Petersen, M. A., & Rajan, R. G. (1995). The Effect of Credit Market Competition on Lending Relationships. The Quarterly Journal of Economics, 110(2), 407–443.

[11]. Filbeck, G., Krueger, T., & Preece, D. (2007). CFO Magazine’s “Working Capital Survey”: Do Selected Firms Work for Shareholders? Quarterly Journal of Business and Economics, 46(2), 3–22.

[12]. Parikh V. (2010). Advantages and Disadvantages of DCF Method, Retrieved from: https://www.letslearnfinance.com/advantages-and-disadvantages-of-dcf-method.html#:~:text=Advantages%20and%20Disadvantages%20of%20DCF%20Method%201.%20It,complex%20circumstances%20also.%203.%20It%20can%20be%20

Cite this article

Gao,J. (2023). Use the DCF Model to Value the Company of NEXT. Advances in Economics, Management and Political Sciences,26,286-294.

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About volume

Volume title: Proceedings of the 2023 International Conference on Management Research and Economic Development

ISBN：978-1-915371-95-9(Print) / 978-1-915371-96-6(Online)
Editor：Javier Cifuentes-Faura, Canh Thien Dang
Conference website: https://2023.icmred.org/
Conference date: 28 April 2023
Series: Advances in Economics, Management and Political Sciences
Volume number: Vol.26
ISSN：2754-1169(Print) / 2754-1177(Online)

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References

[1]. Hoffmann, N. (2013), Discounted Cash Flow Valuation for Small Cap M&A Integration. Journal of Applied Corporate Finance, 25: 116-121.

[2]. Cuninghame-Green, R. A. (1965). Discounted Cash Flow. OR, 16(2), 251–253.

[3]. Data Source, NEXT Pcl. Retrieved from: https://www.nextplc.co.uk/investors/reports-and-presentations/2021-22

[4]. Data Source, Statista. Retrieved from: https://www.statista.com/statistics/885750/average-risk-free-rate-united-kingdom/

[5]. BVWire-UK. (2021). What market risk and risk-free rates are your UK peers using now? Retrieved from: https://www.bvresources.com/articles/bvwire-uk/what-market-risk-and-risk-free-rates-are-your-uk-peers-using-now#:~:text=The%20average%20market%20risk%20premium%20UK%20analysts%20use,rate%20reported%20by%20valuation%20professionals%20in%20the%20U.S.

[6]. Macrotrends LLC. (2020-2023). U.K. Inflation Rate 1960-2023, Retrieved from: https://www.macrotrends.net/countries/GBR/united-kingdom/inflation-rate-cpi#:~:text=Inflation%20as%20measured%20by%20the%20consumer%20price%20index,2021%20was%202.52%25%2C%20a%201.53%25%20increase%20from%202020

[7]. ZHONG, K., WANG, F., & NING, Y. (2016). Implications of Deferred Revenue Changes for Future Financial Performance and Market Underreaction. Quarterly Journal of Finance and Accounting, 54(3–4), 65–100.

[8]. Gallinger, G. W., & Ifflander, A. J. (1986). Monitoring Accounts Receivable Using Variance Analysis. Financial Management, 15(4), 69–76.

[9]. Gentry, J. A., & De La Garza, J. M. (1985). A Generalized Model for Monitoring Accounts Receivable. Financial Management, 14(4), 28–38.

[10]. Petersen, M. A., & Rajan, R. G. (1995). The Effect of Credit Market Competition on Lending Relationships. The Quarterly Journal of Economics, 110(2), 407–443.

[11]. Filbeck, G., Krueger, T., & Preece, D. (2007). CFO Magazine’s “Working Capital Survey”: Do Selected Firms Work for Shareholders? Quarterly Journal of Business and Economics, 46(2), 3–22.

[12]. Parikh V. (2010). Advantages and Disadvantages of DCF Method, Retrieved from: https://www.letslearnfinance.com/advantages-and-disadvantages-of-dcf-method.html#:~:text=Advantages%20and%20Disadvantages%20of%20DCF%20Method%201.%20It,complex%20circumstances%20also.%203.%20It%20can%20be%20

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