company analysis fin 3403, 3404 prof diggle. what is the point of this exercise? n teamwork u peer...
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WHAT IS THE POINT OF THIS EXERCISE? TEAMWORKTEAMWORK
PEER GROUP PEER GROUP ANALYSIS WILL BE ANALYSIS WILL BE MADEMADE
USING REAL USING REAL WORLD WORLD FINANCIAL FINANCIAL STATEMENTSSTATEMENTS
FINANCIAL FINANCIAL FORECASTING FORECASTING BASICSBASICS
INTERPRETING INTERPRETING REAL WORLD REAL WORLD RATIOSRATIOS
BENCHMARKINGBENCHMARKING
GETTING STARTED
SEE YOUR LECTURE NOTESSEE YOUR LECTURE NOTES pp. 5-7 FOR pp. 5-7 FOR DETAILS AND A CHECKLISTDETAILS AND A CHECKLIST
REFER TO EXCEL DISK FOR MORE DETAIL REFER TO EXCEL DISK FOR MORE DETAIL ON POWERPOINT PRESENTATIONON POWERPOINT PRESENTATION
ASSIGN TASKS TO ASSIGN TASKS TO EACHEACH TEAM MEMBER TEAM MEMBER USING DATA YOU HAVE GATHERED, USING DATA YOU HAVE GATHERED,
ENTER AS MUCH AS POSSIBLE ON DISKENTER AS MUCH AS POSSIBLE ON DISK SEE INSTRUCTORSEE INSTRUCTOR
ORGANIZE YOUR TEAM Set a time for team to meet that is convenient Set a time for team to meet that is convenient
for all. I recommend your team meet for all. I recommend your team meet weekly. Each member should report on weekly. Each member should report on progressprogress
WRITE OR CALL COMPANY. ASK FOR:WRITE OR CALL COMPANY. ASK FOR: 5 years of annual reports and/or 10K5 years of annual reports and/or 10K Latest proxyLatest proxy 10Qs since last 10K10Qs since last 10K Recent press releasesRecent press releases
USING INTERNET SOURCES
Find out the TICKER of your companyFind out the TICKER of your company Look on course home pageLook on course home page Click on Internet home pages for financial Click on Internet home pages for financial
data, price information and current news on data, price information and current news on your company. your company.
Download relevant material so you have a Download relevant material so you have a hard copy to show instructorhard copy to show instructor
SEE INSTRUCTOR
I will assist you in interpreting outputI will assist you in interpreting output I need the following:I need the following:
Copy of your diskCopy of your disk Hard copy printoutHard copy printout Copy of annual or 10KCopy of annual or 10K Data on your company, the industry Data on your company, the industry
environment, and selected competitors. I will environment, and selected competitors. I will help you pick benchmarking companies.help you pick benchmarking companies.
THE EXCEL SPREADSHEET
COPY THE DISK I COPY THE DISK I GIVE EACH TEAM. GIVE EACH TEAM. MAKE MULTIPLE MAKE MULTIPLE COPIES AND RETURN COPIES AND RETURN ORIGINAL TO ORIGINAL TO
INSTRUCTORINSTRUCTOR.. Enter data in the Enter data in the
YELLOW CELLS in YELLOW CELLS in your Excel your Excel spreadsheet.spreadsheet.
Use the last 10K 5 Use the last 10K 5 year summary page year summary page for historical data that for historical data that is “Pro-forma.”is “Pro-forma.”
SHOW ME OUTPUT SHOW ME OUTPUT DO DO NOTNOT ENTER ENTER
DATA IN ANY CELL DATA IN ANY CELL EXCEPT YELLOW EXCEPT YELLOW CELLS!!CELLS!!
CHECKLIST ON EXCEL DISK FIN 3403FIN 3403 Complete ratio Complete ratio
analysisanalysis Industry overview and Industry overview and
brief historybrief history Check recent news Check recent news
and chart of stockand chart of stock Prepare 15 MIN Prepare 15 MIN
Powerpoint Powerpoint presentation/handoutspresentation/handouts
FIN 3404FIN 3404 More advanced ratio More advanced ratio
analysisanalysis Complete EPS Complete EPS
forecast(Fin 3403 forecast(Fin 3403 students can do this for students can do this for extra credit)extra credit)
Stock ValuationStock Valuation BenchmarkingBenchmarking 20 MIN PPT 20 MIN PPT
Presentation/ handoutsPresentation/ handouts
ENTERING DATA IN EXCEL SPREADSHEET Use most recent financial reports. Start Use most recent financial reports. Start
with last year and work back,with last year and work back, Get price data, P/E, and LTM E.P.S. from Get price data, P/E, and LTM E.P.S. from
recent recent Wall Street JournalWall Street Journal See instructor with questions. Give See instructor with questions. Give
yourself plenty of time to assemble data on yourself plenty of time to assemble data on company, the industry and the competiton.company, the industry and the competiton.
CHECK YOUR DATA
SPREADSHEET HAS SPREADSHEET HAS DIAGNOSTICS TO DIAGNOSTICS TO GUIDE YOU. GUIDE YOU.
DO RATIOS MAKE DO RATIOS MAKE SENSE?SENSE?
ARE REVENUE AND ARE REVENUE AND EXPENSE ITEMS EXPENSE ITEMS GROWING AT GROWING AT CONSISTENT CONSISTENT RATES?RATES?
IMPORTANT CONCEPTS
ALWAYS EXCLUDE ALWAYS EXCLUDE EXTRAORDINARY EXTRAORDINARY ITEMS.ITEMS.
BE SURE DATA IS BE SURE DATA IS CONSISTENT (PRO-CONSISTENT (PRO-FORMA)FORMA)
ADJUST FOR ANY ADJUST FOR ANY RECENT SPLITS OR RECENT SPLITS OR STOCK DIVIDENDSSTOCK DIVIDENDS
READ THE CEO READ THE CEO LETTER. WHAT IS LETTER. WHAT IS HIS STRATEGY? HIS STRATEGY? DID HE DO WHAT DID HE DO WHAT HE PROMISED IN HE PROMISED IN OLDER ANNUAL OLDER ANNUAL REPORT LETTERS?REPORT LETTERS?
IS THE AUDIT IS THE AUDIT UNQUALIFIED?UNQUALIFIED?
TIPS IN USING 10K10K=ANNUAL, 10Q = QUARTERLY
IF LT DEBT INTEREST IS IF LT DEBT INTEREST IS NOT BROKEN OUT IN NOT BROKEN OUT IN FOOTNOTES, USE TOTAL FOOTNOTES, USE TOTAL INTERESTINTEREST
R&D OR CAPITAL R&D OR CAPITAL SPENDING IS USUALLY SPENDING IS USUALLY FOUND IN CASH FLOW FOUND IN CASH FLOW STMT.STMT.
LOOK ON THE INTER- LOOK ON THE INTER- NET AND ON LEXIS-NET AND ON LEXIS-NEXIS FOR NEWS AND NEXIS FOR NEWS AND RESEARCH.RESEARCH.
TRY AND FIND TRY AND FIND MACRO-GROWTH OF MACRO-GROWTH OF EACH SEGMENT OF EACH SEGMENT OF SALES.SALES.
E.P.S. GROWTH E.P.S. GROWTH SHOULD BE => SALES SHOULD BE => SALES GROWTH. P/E IS TIED GROWTH. P/E IS TIED TO GROWTH.TO GROWTH.
READ FOOTNOTES.READ FOOTNOTES. R.O.E IS THE MOST R.O.E IS THE MOST
IMPORTANT RATIO.IMPORTANT RATIO.
TREND ANALYSIS
LOOK AT SALES LOOK AT SALES SEGMENTS AND SEGMENTS AND MARGINS. WHICH IS MARGINS. WHICH IS GROWING FASTEST.GROWING FASTEST.
USING YOUR USING YOUR FINANCIAL FINANCIAL CALCULATOR, CALCULATOR, CHECK GROWTH OF CHECK GROWTH OF SALES AND SALES AND EXPENSES.EXPENSES.
?
ORGANIZATIONAL TIPS
One team member One team member should be in charge of should be in charge of operating the PC and operating the PC and slides. This person slides. This person may also work on may also work on preparing the slides.preparing the slides.
Two members should Two members should be responsible for be responsible for entering data from 10Kentering data from 10K
One person should get One person should get current prese releases current prese releases and price chart. Another and price chart. Another may assist in getting may assist in getting industry data.industry data.
One team member One team member should prepare DuPont should prepare DuPont Model which is on your Model which is on your diskette.diskette.
COPY ALL FILESCOPY ALL FILES
INDUSTRIAL COMPANY RATIOS (see Lec Notes appendix) INCOME STMTINCOME STMT
GROSS MARGINGROSS MARGIN OPERATING MARGINOPERATING MARGIN PRETAX MGNPRETAX MGN NET MGNNET MGN INVENTORY TURNOVERINVENTORY TURNOVER TOTAL ASSET TOTAL ASSET
TURNOVERTURNOVER
MARKET RATIOSMARKET RATIOS P/EP/E
PRICE / BOOKPRICE / BOOK (BVPS) (BVPS)
BALANCE SHEETBALANCE SHEET CURRENT RATIOCURRENT RATIO QUICK RATIO (ACID TEST)QUICK RATIO (ACID TEST)
P&L + BAL SHEETP&L + BAL SHEET ROEROE ROAROA
CAP. STRUCTURECAP. STRUCTURE X INTEREST EARNEDX INTEREST EARNED LT DEBT / ASSETSLT DEBT / ASSETS LT DEBT / EQUITYLT DEBT / EQUITY
WHAT IS THE “STORY”?
WHAT ARE YOUR WHAT ARE YOUR CONCLUSIONS? CONCLUSIONS? USE RATIO DATA USE RATIO DATA TO SUPPORT YOUR TO SUPPORT YOUR CONCLUSIONS.CONCLUSIONS.
WOULD YOU WOULD YOU INVEST IN THIS INVEST IN THIS COMPANY NOW? COMPANY NOW? WHY OR WHY NOT?WHY OR WHY NOT?
PRESENTATION SLIDES SEQUENCE (each company is unique)
1. Brief company recent 1. Brief company recent historyhistory
2. Trend analysis2. Trend analysis
2. Interpret ratio data2. Interpret ratio data
3. DuPont model3. DuPont model
4. Benchmarking with 4. Benchmarking with competitors using competitors using CompustatCompustat
5. Assumptions in your 5. Assumptions in your forecastforecast
6. Recent news or 6. Recent news or events impacting your events impacting your companycompany
7. Stock chart and price 7. Stock chart and price trends (THIS MAY trends (THIS MAY BE DOWNLOADED)BE DOWNLOADED)
TREND ANALYSIS
SPREADSHEET SPREADSHEET LOOKS AT 5 YR LOOKS AT 5 YR GROWTHGROWTH
USE FIN USE FIN CALCULATOR TO CALCULATOR TO LOOK AT TREND LOOK AT TREND LINE GROWTH IN:LINE GROWTH IN: ASSETSASSETS SALESSALES
NET INCOMENET INCOME L.T DEBTL.T DEBT B.V.P.S.B.V.P.S.
DO A COMPARISON DO A COMPARISON OF YOUR COMPANY OF YOUR COMPANY AND SEVERAL KEY AND SEVERAL KEY COMPETITORS COMPETITORS USING LINE OR BAR USING LINE OR BAR CHARTSCHARTS
TEAM CLASS PRESENTATION
DEVELOP A SCRIPTDEVELOP A SCRIPT ASSIGN ONE TEAM ASSIGN ONE TEAM
MEMBER TO MEMBER TO OPERATE PCOPERATE PC
ONE OR MORE ONE OR MORE TEAM MEMBERS TEAM MEMBERS CAN DO PARTS OF CAN DO PARTS OF THE THE PRESENTATIONPRESENTATION
TIME YOUR TIME YOUR PRESENTATIONPRESENTATION
PREPARE A PREPARE A HANDOUT FOR HANDOUT FOR CLASSCLASS
GIVE INSTRUCTOR GIVE INSTRUCTOR CLASS HANDOUT CLASS HANDOUT AND ALL SLIDES + AND ALL SLIDES + SPREADSHEET & 10k SPREADSHEET & 10k ----PUT IN A FOLDERPUT IN A FOLDER
JUST DO IT!
DRESS DRESS PROFESSIONALLY.PROFESSIONALLY.
WATCH YOUR WATCH YOUR TIME.TIME.
ENCOURAGE ENCOURAGE QUESTIONS AND QUESTIONS AND DISCUSSION DISCUSSION AFTER FORMAL AFTER FORMAL REMARKS.REMARKS.
USING POWERPOINT
ICONS AT BOTTOM ICONS AT BOTTOM OF SCREENOF SCREEN SLIDE EDIT VIEWSLIDE EDIT VIEW OUTLINEOUTLINE SLIDE SORTER (you SLIDE SORTER (you
can move slides can move slides around)around)
SCRIPTSCRIPT FULL VIEW --FULL VIEW --USE USE
FOR PRESENTATIONFOR PRESENTATION
PPT IS EASY AND PPT IS EASY AND FUNFUN
EXPERIMENT WITH EXPERIMENT WITH ICONS AND SOUND ICONS AND SOUND EFFECTSEFFECTS
BE SURE FONTS BE SURE FONTS ARE LARGE ARE LARGE ENOUGH TO BE ENOUGH TO BE SEEN AT BACK OF SEEN AT BACK OF ROOMROOM
USING MS POWERPOINT
Computer labs for Computer labs for UCF use WINDOWS UCF use WINDOWS NT. Classroom NT. Classroom computer uses this as computer uses this as well. well.
Try and save your file Try and save your file in Windows NT in Windows NT (1997). Make (1997). Make multiple copies.multiple copies.
Load your presentation Load your presentation on the PC before class on the PC before class on the C drive.on the C drive.
Be sure and test slides Be sure and test slides to be sure everything to be sure everything works. works. IF YOU SAVE IF YOU SAVE DATA IN AN EARLIER DATA IN AN EARLIER VERSION OF VERSION OF WINDOWS YOU MAY WINDOWS YOU MAY HAVE A PROBLEMHAVE A PROBLEM
SAVE REPORT FOR JOB INTERVIEWS
MAKE A COPY FOR MAKE A COPY FOR EACH TEAM EACH TEAM MEMBERMEMBER
PUT ON YOUR PUT ON YOUR RESUME THAT:RESUME THAT: YOU ARE YOU ARE
PROFICIENT IN MS PROFICIENT IN MS EXCEL AND EXCEL AND POWERPOINTPOWERPOINT
DO AN ANALYSIS DO AN ANALYSIS OF EACH PUBLIC OF EACH PUBLIC INDUSTRIAL INDUSTRIAL COMPANY THAT COMPANY THAT YOU PLAN TO YOU PLAN TO INTERVIEW WITHINTERVIEW WITH
GIVE INTERIEWER GIVE INTERIEWER COPY OF COPY OF ANALYSISANALYSIS
TEAM PEER EVALUATION
I AM NOT A POLICEMAN. YOUR TEAM I AM NOT A POLICEMAN. YOUR TEAM ORGANIZATION IS UP TO YOU.ORGANIZATION IS UP TO YOU.
I I AMAM INTERESTED IN MAKING SURE INTERESTED IN MAKING SURE THAT THAT ALLALL TEAM MEMBERS WORK. TEAM MEMBERS WORK.
PLEASE SEE ME WITH ANY PLEASE SEE ME WITH ANY PROBLEMS. DO NOT WAIT UNTIL END PROBLEMS. DO NOT WAIT UNTIL END OF THE TERM! SET MEETING TIMES OF THE TERM! SET MEETING TIMES THAT WORK FOR ALL MEMBERS.THAT WORK FOR ALL MEMBERS.
FIN 3404 COMPANY ANALYSIS PROJECT
PROF DIGGLEPROF DIGGLE
ADDITIONAL ADVANCED ADDITIONAL ADVANCED CONCEPTSCONCEPTS
READING THE WSJ
SEE LEC NOTES PP. SEE LEC NOTES PP. 43-4443-44
SEC C:SEC C: LEFT COL-PG 1 LEFT COL-PG 1
FINANCIAL MKTSFINANCIAL MKTS TREASURY BONDS, TREASURY BONDS,
NOTES AND BILLSNOTES AND BILLS AGENCIESAGENCIES NYSE STOCK QUOTESNYSE STOCK QUOTES NASDAQNASDAQ
SEC C CONTDSEC C CONTD DOW JONES DOW JONES
AVERAGESAVERAGES CHARTSCHARTS READING A STOCK READING A STOCK
QUOTE ON YOUR QUOTE ON YOUR COMPANYCOMPANY
SEC B--THE MARTSEC B--THE MART
FORECASTING
1. Determine 1. Determine segments--I will assistsegments--I will assist
2. Develop an estimated 2. Develop an estimated growth rate for each growth rate for each segment salessegment sales
3. Develop an estimated 3. Develop an estimated margin for each margin for each segment based on the segment based on the corporate wide margin corporate wide margin
4. Spreadsheet will 4. Spreadsheet will develop a forecast. develop a forecast. You should know what You should know what E.P.S. were for the past E.P.S. were for the past year. Adjust your year. Adjust your growth rates to coincidegrowth rates to coincide
5. Fine tune forecast. 5. Fine tune forecast. This is a trend line This is a trend line forecast only.forecast only.
VALUATION
Complete Dividend Complete Dividend Discount Model (part Discount Model (part of Excel spreadsheet)of Excel spreadsheet)
Complete DuPont Complete DuPont ModelModel
Chart the stock. You Chart the stock. You may be able to may be able to download this. Use a 5 download this. Use a 5 year chart if possible.year chart if possible.
Compare the current Compare the current price with DDM price with DDM value. value.
Compare P/E and Compare P/E and Price to BVPS with Price to BVPS with historical data and historical data and industry norms.industry norms.
WOULD YOU BUY WOULD YOU BUY THIS STOCK NOW?THIS STOCK NOW?