Rationale For Trefis Price Estimate
Since the spin-off is expected to be completed by the end of FY2019, we are valuing the company based on FY2020 estimates
We are valuing the company at about 9.5x projected FY'20 EPS, higher than the Gap's current trading multiple of 7x. However, this multiple is lower than the Gap's Trefis trading multiple of 12.2x as Old Navy's forms a significant part of the current entity.Based on our forecast, New Entity's adjusted EPS for fiscal 2020 is likely to be around $1.05. Using this figure with our estimated P/E ratio of 9.5x, this works out to a price estimate of $10 for New Entity's shares.