Stock Draft and Valuation Analysis

This project is an individual project. It requires you to perform a short financial analysis on two specific publicly listed companies you select for the WSJ summer stock picking contest. The stock-picking process will be closed on Friday, 08/27. The link is as follows. Heard on the Street Summer Stock Picking Contest 2021 (wsj.com)

The project is designed to assist you in integrating many of the topics learned in this course, as well as to give you an opportunity to apply your knowledge in a practical way. The project requires you to utilize resources from the websites/Bloomberg to search out real-world data relating to your specific company.

Valueline: https://westlibrary.txwes.edu/research/eresources/value-lines-investment-survey-reports

Morningstar.com: www.morningstar.com

CNBC.com: www.cnbc.com

WSJ: www.wsj.com

In addition, this exercise should provide training in writing business reports and working effectively. Please use the data regarding the selected company’s annual or quarterly reports from the selected company’s website. You can also go to the company’s website to get the recent quarter conference call video/audio. This will help you understand the company’s business profile: sector, product and services, customer and end markets, distribution channels and geography etc.

Final Report Requirements on Apple

1. Executive Summary – a one-page summary of the analysis, forecasts and recommendations for the Apple company, is it buy or sell.

2. Introduction and business description– briefly describe your chosen industries, and the publicly listed companies to be analyzed; describe the business the company is involved with. Please discuss all business aspects of the company which might help understanding the company, including management and corporate governance if necessary

3. Industrial overview and competitive positioning – provide your simple and relevant economic & financial analysis on how the macro factors may affect performance of the industry and the company; provide your assessment of timelines and future prospects for your industries. Focus on major factors (Porter’s five factors) which will impact the expected revenues, margin, and profitability for your industries. You can get the latest industry averages from Mergent Online, which is available from the West library (see link at the middle of the page):

https://westlibrary.txwes.edu/resources/eresources/search/Mergent%20Online

Here is a video that explains how to find and download the industry and major competitor ratios:

https://www.library.ohio.edu/subjects/businessblog/how-to-find-industry-ratios-and-averages-using-mergent-online/

4. Company analysis: Conduct a quick company analysis to justify your valuation and recommendation.

1. Investment Summary – Please provide brief discussions on investments made by the company. Justify how these existing investments and potential investments projects will affect the company’s expected revenue, margin, profitability and growth. How these investments will position the company in the future’s competition.

2. Financial Analysis – Examine the firm’s balance sheets, income statements and cash flow statements. How are the firms doing financially? Also conduct an historical, comparative ratio analysis, and Dupoint decomposition of your three companies. The ratio categories might include all of liquidity, asset management, debt management, profitability and market ratios, but not required. It can also include industry-specific ratios for analysis. The analysis should cover at least the past five years. Many of the ratios can be found on the Bloomberg or Morningstar.com or Valueline company analysis pages from the library (https://westlibrary.txwes.edu/research/eresources/value-lines-investment-survey-reports). Identify whether the firm has competitive advantage(s) and whether they can maintain the competitive advantage(s) over time.

3. Valuation – Decide which valuation model you will use to make recommendation. You can use Discounted Cash Flow models, and/or relative valuation methods to determine the firm’s estimated intrinsic value, and make investment recommendation – Indicate whether you recommend a buy, hold, or sell for your companies. In this part, you need to show me how to calculate the beta from excel regression, how you derive the estimated intrinsic values from different valuation models you use.

4. Investment Risk – You are also required to discuss all assumptions for valuations and risks associated with these assumptions. How changes of assumptions will affect your estimated intrinsic value. Please discuss risks associated with the company’s operation, competitor’s response, and markets.

Some rules:

1) The written report (excluding appendices) should be no more than 10 pages in length.

2) Tables and calculations should appear as appendices at the end of the document. Show all calculations clearly and cite any reference clearly.

3) Projects will be graded for exposition and grammar, as well as for technical content.

Stock Valuation Project Evaluation Rubric for ________________________________

1. Clearly outline the structure of the paper

2. Conclusions are clearly stated in the executive Summary

3. Introduction: clearly describe business

4. Discussions on industry overview and competitive positioning

5. Firm’s Investment discussion and summary

6. Financial analysis

7. Valuation