The research brief: Rowan Tools
Rowan sells replacement tools through distributors. Current annual revenue is $200m, EBITDA margin is 15%, net debt is $40m and diluted shares are 20m. The current share price is $10.00. Assume no preferred stock, noncontrolling interests, other nonoperating assets or dilution beyond the stated share count.
You are valuing the shares at a one-year horizon. For this exercise, use next year's EBITDA and the stated horizon net debt, with no interim dividends. The multiple ranges are hypothetical assumptions, not observed trading comparables.
| One-year case | Revenue | EBITDA margin | EV/EBITDA | Net debt |
|---|---|---|---|---|
| Downside | $190m | 13% | 7.0x | $45m |
| Base | $210m | 16% | 8.0x | $35m |
| Upside | $220m | 17% | 9.0x | $30m |
- Calculate current EV and current EV/EBITDA.
- Calculate one-year implied price and price return under each case.
- Write a two-sentence investment view that acknowledges downside.
- Identify evidence needed to support the base-case growth, margin and multiple.
The pitch structure
This packet does not provide consensus estimates, so you cannot honestly claim a variant view against consensus yet. Write what you would need to obtain. A positive calculated return alone is not evidence that the market is wrong.
| Part | Prompt |
|---|---|
| Business | Who pays, for what product, and what drives repeat demand? |
| Variant view | Which operating assumption differs from an observable consensus or market-implied expectation? |
| Evidence | Which filing, dataset or documented observation supports it? |
| Valuation | How do operating assumptions translate to equity value per share? |
| Catalyst | What could cause investors to revise expectations, and when? |
| Risk / disconfirmation | What observable evidence would make you change your view? |
My business description and proposed view
Evidence I have / evidence I still need
The finding that would invalidate my view
Use your own notes or the writing space in the downloadable PDF.
Worked valuation: keep the equity bridge visible
Current equity value is $10 x 20m = $200m; adding $40m net debt gives $240m EV. Current EBITDA is $200m x 15% = $30m, so the current multiple is 8.0x. In the base case, EBITDA grows $3.6m. At an unchanged 8.0x multiple, that adds $28.8m EV; a $5m reduction in net debt adds another $5m equity value. Together they add $1.69 per share.
The base case implies 16.9% price upside, but the stated downside is 36.05%. These are scenarios, not probabilities. You have not established that the upside is likely or that the risk is acceptable.
| $m except per share | Downside | Base | Upside |
|---|---|---|---|
| EBITDA | 24.7 | 33.6 | 37.4 |
| Enterprise value | 172.9 | 268.8 | 336.6 |
| Less net debt | 45.0 | 35.0 | 30.0 |
| Equity value | 127.9 | 233.8 | 306.6 |
| Value per share | $6.395 | $11.69 | $15.33 |
| Price return vs $10 | -36.05% | +16.90% | +53.30% |
Build an evidence log before writing the conclusion
For a real company, start with its filings and record the period, definition and location of each figure. Read the business description, risk factors, financial statements, notes and management discussion. Reconcile adjusted metrics to their definitions and compare like periods.
| Claim to test | Evidence to request | What could weaken it |
|---|---|---|
| Replacement demand supports growth | End-customer demand, distributor inventory and sell-through data | Channel loading or unusually high inventories |
| Margin can improve to 16% | Pricing, input-cost, labor and product-mix bridge | Discounting, lower utilization or temporary cost benefits |
| 8.0x remains appropriate | Relevant peers, risk and growth comparison on consistent definitions | Worse cash conversion or changed business risk |
| Net debt falls to $35m | Cash flow after capex, tax and working capital | Inventory build, acquisitions or dividends |
An honest preliminary pitch
Now deliver your version in 90 seconds. Explain the thesis, valuation bridge, key risk and the next piece of evidence you need. A good discussion makes the assumptions inspectable; it does not hide uncertainty behind a precise target price.
Source notes
Sources support the underlying concepts. The worked cases, figures and examples are original teaching material with the assumptions stated in the resource.
Background for the filing review checklist. Rowan Tools and all valuation scenarios are original fictional teaching material.
Questions about this resource
Is Rowan Tools a real investment recommendation?
No. It is a fictional case. The prices, multiples and operating assumptions are supplied solely for practice.
Should I probability-weight these scenarios?
Only if you can justify the probabilities. The case provides no probability evidence; labeling an average as expected value would add an unsupported assumption.
Build on the exercise
More practice for the gap you found.
Continue with complete research notes, operating forecasts and longer cases with spreadsheet exercises.
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Stock pitch worksheet: a view you can defend
Free resource
State a valuation view, its operating assumptions and the evidence that would change it.