Valuation of Norway Royal Salmon ASA

Abstract

In this bachelor thesis, I have performed a valuation of Norwegian Royal Salmon ASA (NRS). The problem statement in the thesis is defined as: ‹‹What is the fundamental value of a share in NRS, traded at the Oslo Stock Exchange as of 23.05.2017››? With a sub-problem statement: ‹‹Should the fictive investor buy, remain neutral, or sell the NRS stock when his objective is financial profit››? The valuation is built of many different analyzes. The first step was to analyze the financial statement of the firm and to compare historical key figures of NRS and an industry benchmark. This was done to gain a better understanding of the firm’s current financial position. The second analysis I performed was a profound strategic analysis, which consisted of both internal and external aspects of the firm. A good strategic analysis of macro-economic factors, and potential competitive advantages is essential in order to understand the firm’s ability, and possibilities, to grow in the future. Based on the financial statement analysis and the strategic analysis, I started to forecast the next ten years for the company. I chose a period of 10 years to avoid undervaluing the firm, which is a common result in a valuation of cyclical companies if the forecast period is shorter. The main valuation approach in this thesis is the discounted cash flow (DCF) analysis. The forecasted variables serve as inputs in the DCF model. Due to the high uncertainty tied to the value estimate derived from the model, I have also used relative valuation as a control method. Once the valuation was performed, I conducted different simulations and sensitivity analyzes to see what happens with the share price when selected variables in the DCF model are changed. As an answer to the problem statement, I have concluded that the NRS stock is currently undervalued in the market in relation to its fundamental value, which results in a buy recommendation to the fictive investor.