Business Case Studies & Business Publications

American Greetings

Schill, Michael J.

Case

American Greetings

Schill, Michael J.

F-1693 | Published March 28, 2013 | 14 pages Case

Collection: Darden School of Business

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This case is used in Darden's FY Finance course, but it would be appropriate in any course introducing firm valuation. The case examines the 2012 decision by American Greetings (AG) to repurchase shares. Students can build a simple model of the company’s future cash flows and derive an implied value. Because the company is arguably in a state of maturity or decline, a discussion of steady-state economics is particularly germane.

• Introduce firm valuation techniques based on a simple discounted cash flow (DCF) model or market multiples. • Stimulate an appreciation for terminal value assumptions and their impact on firm valuation. • Build intuition on the relationships among firm growth, operating profitability, and value creation. • Discuss shareholder distribution policy theory and practice with regard to share repurchases and dividends.