What is the value of the company? The valuation case of Magazine Luiza

Abstract

Objective: Magazine Luiza, founded in November 1957, a national retail icon, started in 2011 at B3, with exponential growth in the valuation of its shares. This case provides the following pedagogical objectives: a) to promote the problem analysis, to propose and inquire decisions regarding valuation; b) stimulate reflection between the theory that supports the evaluation purposes and the way it should be developed and applied; c) expand the ability to relate the valuation theoretical assumptions of valuation and their adequacy to reality. Methodology: The Financial Statements were extracted from the MGL company website, on Economática® and on B3 website. Professor Damodaran's database was also used. We highlight the data are real, however, on the other hand, the existence of Alpha Varejo and its proposed acquisition of Magazine Luiza is considered as a hypothetical situation. Results: From a behavioral point of view, it allows students and professors to have fair and discussions so that there is mutual respect for divergent opinions and ideas, allowing the exposure of their points of view. Estimating the company's value using the Discounted Cash Flow and Relative Valuation methods is a complex task and can be considered as an important decision-making process, especially for the company's shareholder. In the use of methods, there is the need to choose appropriate premises that best reflect the reality of the company. Study Contributions: The performance of the proposed activity, with undergraduate or graduate students in the business area in disciplines aimed to analyze the financial viability of companies and valuation, contributes to the training of these students with critical analysis development and stimulating discussion in ​​finance area.