SUMMARY OUTPUT

Regression Statistics
Multiple R 0.7152247824
R Square 0.5115464894
Adjusted R Square 0.4363997955
Standard Error 9.104030473
Observations 16

ANOVA
df SS MS F Significance F
Regression 2 1128.425 564.2124 6.807305 0.009492
Residual 13 1077.484 82.88337
Total 15 2205.909

Coefficients Standard Error t Stat P-value Lower 95%Upper 95%

Lower 95.0%
Intercept 20.86 6.935023 3.008166 0.010079 5.879496 35.84391 5.879496
X Variable 1 183.19 50.10407 3.656191 0.002903 74.9468 291.4333 74.9468
X Variable 2 -63.91 24.31469 -2.62865 0.020841 -116.443 -11.386 -116.443

PE=20.86+183.19Expected Growth-63.91 Standard Deviation

R Square =51.15%
Upper 95.0%
35.84391
291.4333
-11.386
Comparing PE Ratios and Growth Rates across Firms

The PE ratios and expected growth rates in EPS over the next five years based on consensus esti
are summarized in the following table

Company Name Trailing PE Expected Growth in %

Coca Cola Bottling 29.18 9.5
Molson Inc 43.65 15.5
Anheuser Busch 24.31 11
Corby Distilleries 16.24 7.5
Chalone Wine Group 21.76 14
Andres Wines Ltd 8.96 3.5
Todhunter Intl 8.94 3
Brown Forman 10.07 11.5
Coors 23.02 10
PepsiCo 33 10.5
CocaCola 44.33 19
Boston Beer 10.59 17.13
Whitman Corp 25.19 11.5
Mondavi 16.47 14
Coca Cola Enterprises 37.14 27
Hansen Natural Corp 9.74 17
Average 22.66 12.60

Is Andres Wines undervalued on a relative basis ?

Asimple view of multiples would lead you to conclude this because its PE ratio of 8.96 was sign
One way of bringing growth into the comparison is to compute the PEG ratio

Based on the average PEG ratio of 2 for the sector and the estimated growth rate for Andres W

PE ratio =2*3.5=7

Sector Regression
When firms differ on more than one variable, it becomes difficult to modify the multiple to acc
You can run a regression of the multiple against the variables and then use this regression to fin

Company Name Trailing PE Expected Growth Rate

Coca Cola Bottling 29.18 9.50%
Molson Inc 43.65 15.50%
Anheuser Busch 24.31 11%
Corby Distilleries 16.24 7.50%
Chalone Wine Group 21.76 14%
Andres Wines Ltd 8.96 3.50%
Todhunter Intl 8.94 3%
Brown Forman 10.07 11.50%
Coors 23.02 10%
PepsiCo 33 10.50%
CocaCola 44.33 19%
Boston Beer 10.59 17.13%
Whitman Corp 25.19 11.50%
Mondavi 16.47 14%
Coca Cola Enterprises 37.14 27%
Hansen Natural Corp 9.74 17%

PE=20.86+183.19Expected Growth-63.91 Standard Deviation

The predicted PE Ratio for Coca Cola 20.86+ 183.19*19%-63.91*35.51%

32.97

The actual PE ratio for Coca Cola was 44.33 .This would suggest that the stock was overvalued g
five years based on consensus estimates from analysts ,for the firms that are categorized as beverage firms

Standard Deviation PEG

20.58% 3.07
21.88% 2.82
22.92% 2.21
23.66% 2.17
24.08% 1.55
24.70% 2.56
25.74% 2.98
29.43% 0.88
29.52% 2.30
31.35% 3.14
35.51% 2.33
39.58% 0.62
44.26% 2.19
45.84% 1.18
51.34% 1.38
62.45% 0.57
33.30% 2.00

ause its PE ratio of 8.96 was significantly lower than the average for industry
e the PEG ratio

mated growth rate for Andres Wines ,

cult to modify the multiple to account for the difference across firms
and then use this regression to find the predicted value for each firm.

Standard Deviation
20.58%
21.88%
22.92%
23.66%
24.08%
24.70%
 25.74%
29.43%
29.52%
31.35%
35.51%
39.58%
44.26%
45.84%
51.34%
62.45%

-63.91*35.51%

t that the stock was overvalued given how the rest of the sector was priced .