Should I invest in Cielo S.A. or not? Evaluation of metrics and valuation assumptions
DOI:
https://doi.org/10.21680/2176-9036.2026v18n2ID39214Keywords:
Business Valuation; Discounted Cash Flow; Cielo.Abstract
Purpose: Assist students in understanding and applying business valuation techniques through critical analysis of assumption determination, method selection, and essential valuation concepts, telling the fictitious story of an inexperienced investor in the Capital Market.
Methodology: To guide the case, valuation methodologies are presented: Book Value, Market Value, Relative Valuation, Economic Value Added/Market Value Added and Discounted Cash Flow. Each method was applied to evaluate Cielo from different perspectives, considering the impact of economic and industry variables, as well as uncertainties arising from factors such as the COVID-19 pandemic. These approaches aim to stimulate critical analysis and to support guiding questions focused on decision-making by students, instructors, and supervisors in the context of valuation education.
Results: The analysis indicates that, in recent years, Cielo has experienced a sharp decline in market value and value generation, reinforcing uncertainties about the company's future performance. Ultimately, based on the valuation methods, the recommendation for João was that Cielo's stock had an intrinsic value higher than its market price, suggesting a buy, provided the valuation assumptions are properly substantiated.
Contributions of the Study: This teaching case encourages students to discuss different business valuation approaches, comparing advantages and limitations, and guides them in developing the ability to make investment decisions grounded in specific financial and macroeconomic contexts.
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