Triangulating Valuation  705
We discounted the free cash flows for ConsuCo under the base case and 
the downside scenario. The resulting present values of operations are shown 
in Exhibit 35.6. Note that we conducted the analysis in both nominal and real 
cash flows to show that the results were identical. We then weighted the valu-
ation results by the scenario probabilities to derive the present value of op-
erations. Finally, we added the market value of the nonoperating assets and 
subtracted the financial claims to arrive at the estimated equity value. The 
estimated equity value obtained for ConsuCo was about 32 reais per share, 
given a 30 percent probability of economic distress. This was somewhat lower 
than ConsuCo’s share price in the stock market of around 37 reais at the time 
of valuation.
To triangulate with multiples, we apply Chapter 18’s guidance on how to 
perform a best-practice multiples analysis to check valuation results. For the 
ConsuCo example, we compared the implied multiple of enterprise value over 
EBITDA with those of peer companies. All multiples were forward-looking 
EXHIBIT 35.6  ConsuCo: Scenario DCF Valuation
reais, million
2019
2020
2021
2022
2023
2024
. . .
2029
. . .
2034
Base case
Nominal projections
Free cash flow
 (63)
 (136)
 (94)
 (91)
 (85)
 113 
. . . 
 301 
. . .
 516 
WACC, %
11.1
9.5
9.3
9.2
9.1
9.0
. . .
9.0
. . .
9.0
Real projections
Free cash flow
 (60)
 (125)
 (83)
 (77)
 (68)
 87 
. . .
 187 
. . .
 257 
WACC, %
6.0
5.1
4.9
4.7
4.5
4.4
. . .
4.4
. . .
4.4
Value 
per share 32
Probability 
70%
DCF value
 14,451 
Nonoperating assets
 1,139 
Debt and debt equivalents
 (5,605)
Equity value
 9,985 
Value per share
 42.4 
 
Downside scenario
Nominal projections
Free cash flow
 (149)
 (777) (2,533) (4,504) (2,677)
 (558)
. . .
 250 
. . .
 834 
WACC, %
11.1
29.4
76.7
76.4
28.7
9.5
. . .
9.0
. . .
9.0
Real projections
Free cash flow
 (142)
 (593) (1,105) (1,123)
 (534)
 (106)
. . .
 38 
. . .
 102 
WACC, %
6.0
3.5
1.0
0.8
2.9
4.3
. . .
4.4
. . .
4.4
Probability 
30%
DCF value
 6,313 
Nonoperating assets
 1,139 
Debt and debt equivalents
 (5,605)
Equity value
 1,847 
Value per share
 7.9 

706  Emerging Markets
multiples over EBITDA. As Exhibit 35.7 illustrates, the implied multiple from 
our ConsuCo valuation was significantly higher than for U.S. and European 
peers, which was not surprising, given its higher growth outlook in the Bra-
zilian market compared with that of large established chains in the U.S. and 
European markets. ConsuCo’s valuation was at the low end of the range for 
Latin American peers, which also was not unreasonable. Relative to regional 
peers, ConsuCo could have been expected to have fewer growth opportuni-
ties, as it was already very well established and geographically widespread. It 
also had somewhat more exposure than listed peers had to the lower-growth 
food segment.
The last part of the triangulation consisted of valuing ConsuCo using a 
country risk premium approach. Using Exhibit 35.4, we estimated a country 
risk premium for ConsuCo. We observed from history that the probability of 
country crises appears to be around 20 to 30 percent and that for consumer 
goods businesses, it rarely leads to a loss of all cash flows. Taking that into ac-
count, a country risk premium for a Brazilian retailer like ConsuCo was likely 
in the range of 1 to 2 percent, rather than 3 to 5 percent or higher, as analysts 
often estimate.
Discounting the business-as-usual scenario at the cost of capital plus a 
country risk premium in this range led to a value per share below 20 reais, 
far lower than the 32-reais result obtained in the scenario DCF approach. The 
EXHIBIT 35.7  ConsuCo: Multiples Analysis vs. Peers
PeerCo 12
PeerCo 9
PeerCo 4
PeerCo 6
PeerCo 2
PeerCo 8
U.S. and European peers
PeerCo 13
PeerCo 10
PeerCo 7
PeerCo 5
ConsuCo
PeerCo 16
PeerCo 17
Latin American peers
PeerCo 18
Enterprise value/EBITDA, 2019
10.3
9.5
8.9
8.3
7.8
7.5
7.1
7.1
6.2
5.8
11.2
16.1
15.8
11.7