American Greetings

Abstract

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.

Excerpt

UVA-F-1693

Rev. Mar. 4, 2016

American Greetings

This year American Greetings is demonstrating to naysayers that the greeting card space is not dead. The company has accelerated top-line [growth] through a combination of organic growth and acquisitions, and year-to-date revenues are trending well ahead of our forecast. However, the growth has come at a cost that is also far greater than we had anticipated…In Q3 marketing, spending increased by a surprising $ 10 million…The company also accelerated investment spending in the digital space to support the growth of recently launched cardstore.com. In addition, [American Greetings] has incurred…incremental expenses this year to roll out new doors in the dollar-store channel.

—Jeff Stein

Managing Director, Northcoast Research

. . .

Keywords: firm valuation, discounted cash flow, market multiples[RETURN]