Novice Investing - Earning Per Share Calculation for Novell Inc.

Date: Friday 29th 2008f August 2008 12:55:43 PM

EPS Estimation for CC

This is the heart of our analysis. All we try to do is to predict the company's profit for the coming fiscal year. We spent most of the analysis predicting revenue because without it, there will be no profit! Therefore, predicting revenue is essential for other components of the income statement.

Revenue Estimation

For fiscal year ending on February 2008, revenue will be stagnant at Circuit City. Judging at past history, Circuit City sales came in at $ 12.4 Billion in fiscal year 2007. We would think that based on current grim economic circumstances, Circuit City will be hurt quite significantly. While our estimation is not backed by more data (a.k.a low accuracy), we expect a revenue decrease as much as 10% from 2007 level and that translates into $ 11.16 Billion.

Gross Profit Estimation

Gross margin has been quite steady at Circuit City at between 23-25%. A combination of firedog (home theater and PC related services) and floundering consumer spending, we'll assume gross profit of 23.5% for the aforementioned fiscal year.

SG&A Estimation

Selling General & Administrative Expense is a big problem for Circuit City in 2007. As a result, the company announced cuts for its 3000 personnels and replace them with new hires. While this represents less than 10% of total workforce, it hurts morale and store performance. For 2009, we would expect Circuit City to smarten up and rehire those older personnels to increase the quality of the shopping experience. For 2009, SG&A cost is: $ 2.7 Billion, a 5 % decrease from fiscal year 2007.

Interest & Income tax expense

Circuit City has more cash equivalents & long term investment than it has long term debt. Therefore, we predict interest expense to be $ 0. Meanwhile, we'll peg tax rate to be 35% if Circuit City fiscal year is going to be profitable.

Shares Outstanding Estimation

Shares outstanding for Circuit City is 168.6 Million recently. While there may be past stock buyback that would increase earning per share, we'd just assume constant shares outstanding for Circuit City fiscal year 2009.

Pro Forma Income Statement for CC	Fiscal year 2009
Revenue	$ 11,160 M
Cost of Goods Sold	$ 8,538 M
Gross Profit	$ 2,622 M
SG & A	$ 2,700 M
R& D expense	$ 0 M
Interest Expense	$ 0 M
Profit Before Tax	$ - 78 M
Income Tax Expense	$ 0 M
Net Income	$ - 78 M
Shares Outstanding	168.6 M Shares
EPS Estimate	$ - 0.46

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