Manchester United Ltd (NYSE:MANU) shares are trading lower on Monday following reports suggesting the club is worth around $1.6 billion, which is far less than the company’s current market cap.
What To Know: Manchester United is currently up for sale and its owners are reportedly targeting a sale price between $6 billion and $7 billion.
According to Financial Times, although the valuation of the famous team and its brand is not a straightforward calculation, Lex-in-depth believes the club is worth less than half of what its current valuation suggests.
While there are various methods to determine the valuation of a top football brand like United, the report indicates that scarcity value adds a premium to its intrinsic worth.
One approach to calculate an appropriate valuation is to use earnings multiples based on after-tax profit as a proxy for cash flow. United now trades at about 28 times its estimated EBITDA for the year to June 2023, according to data from S&P Capital IQ.
See Also: Wait, Is Elon Musk Considering A Manchester United Bid After All?
Discounted cash flow analysis is another method that can be used to determine the valuation of the United football team and its brand. This involves using cash flow projections over a long period of time and applying a discount factor and other assumptions to estimate the current capital value. However, these models can be highly sensitive to minor changes in assumptions. Despite this, using reasonable growth expectations, the resulting valuation from Lex’s analysis was notably low, at approximately $1.6 billion.
Related Link: Financial Times Report Says Manchester United Could Be Worth Only ~$1.6B vs $6B-$7B Asking Price
MANU Price Action: Manchester United has a 52-week high of $27.34 and a 52-week low of $10.41.
Manchester United shares are down 10.1% at $20.59 at the time of publication, according to Benzinga Pro.
Photo: nmoodley from Pixabay.
