DISCOUNTED CASH FLOW VALUATION OF TIFFANY & CO.

Abstract

This thematic paper demonstrates how to value the stock price of Tiffany & Co. using the discounted cash flow to the firm model, by creating a free cash flow forecast and calculating a reasonable valuation of the firm’s share price and at the end deciding whether to buy/hold/sell the company’s stock. Tiffany & Co. is a USD-based company engaged in the design, manufacture, and marketing of high-end jewelry. It offers the following product categories: engagement and designer jewelry, jewelry collection, watches, home and accessories products, and fragrances. The company had a very impressive growth rate during the past 5 years. Moreover, the company is planning to merge with LVMH and enforce its new product mix and expand its digital and social media market. This merger is expected to support its high-end jewelry product position while reducing gross margin. The result from this paper shows the value of the TIF share price is expected to be 27% lower than the current share price. This leads to my recommendation of “Sell” regardless of the potential growth and their strong business model.