Long/Short Investments
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Long/Short Investments in L/S Equity: Valuation and Ideas,

​Panera (PNRA) Valuation

Although PNRA has an equity-heavy capital structure, its cost of capital is quite low. Lately the stock has had little correlation to the market and has a long-run volatility of less than the market as a whole. I calculate its cost of capital at 6.2%.

Based on the aforementioned operating/financial assumptions, I have PNRA estimated within a range of $171-$238 per share, with a median fair share price estimated at just shy of $200 per share, suggesting that (again as a median) today’s current price leaves the stock about 9% overvalued.*

Working in WACC and long-term growth rate, g, sensitivity adjustments:

I give the company a fair value estimate between $4.9B-$5.5B, with a median approximation of $5.2 billion. The market current values the company at $5.52 billion, or roughly 6.2% above the estimated median fair value.

Although I have the company’s EBITDA multiples estimated between 13x-15x in the near-term, I have PNRA normalizing to an multiple of ~8x in the long-term.


*Note: Given that PNRA’s current liabilities exceed the company’s current assets, I consider none of PNRA’s cash as “excess” and therefore make no cash-related adjustment when working down from enterprise value to equity value.