Discounted cash flow (DCF) valuation of a multinational company – a case study of PUMA SE

Abstract

Valuation is a central discipline in finance, with the Discounted Cash Flow (DCF) approach sometimes referred to as the “gold standard”. Despite extensive literature on DCF valuation, few studies explicitly tackle the complexities of extending this method to multinational enterprises (MNEs), which are increasingly influential. This master's thesis aims to fill this gap by applying the DCF valuation to the MNE "Puma SE", presenting these challenges in practice and providing solutions for them. The findings emphasize the need to accurately incorporate the unique characteristics of an MNE into the valuation model, considering the data availability. This involves, among others, a balanced use of aggregated and disaggregated free cash flows to the firm (FCFF) forecast, a careful selection of the length of the forecasting period and a precise estimation of the cost of equity. The overall DCF analysis for Puma SE indicates a slight undervaluation by the market as of 31.12.2023