company analysis -- prof diggle

8/2/2019 Company Analysis -- Prof Diggle

http://slidepdf.com/reader/full/company-analysis-prof-diggle 1/28

COMPANY ANALYSIS

FIN 3403, 3404FIN 3403, 3404

PROF DIGGLEPROF DIGGLE



WHAT IS THE POINT OF THIS

EXERCISE?s TEAMWORK TEAMWORK

x PEER GROUPPEER GROUP

ANALYSIS WILL BEANALYSIS WILL BEMADEMADE

s USING REALUSING REAL

WORLD FINANCIALWORLD FINANCIAL

STATEMENTSSTATEMENTS

s FINANCIALFINANCIAL

FORECASTINGFORECASTING

BASICSBASICSs INTERPRETINGINTERPRETING

REAL WORLDREAL WORLD

RATIOSRATIOS

s BENCHMARKINGBENCHMARKING



GETTING STARTED

s SEE YOUR LECTURE NOTESSEE YOUR LECTURE NOTES pp. 5-7 FOR pp. 5-7 FOR

DETAILS AND A CHECKLISTDETAILS AND A CHECKLIST

s REFER TO EXCEL DISK FOR MORE DETAILREFER TO EXCEL DISK FOR MORE DETAILON POWERPOINT PRESENTATIONON POWERPOINT PRESENTATION

s ASSIGN TASKS TOASSIGN TASKS TO EACHEACH TEAM MEMBER TEAM MEMBER

s

USING DATA YOU HAVE GATHERED,USING DATA YOU HAVE GATHERED,ENTER AS MUCH AS POSSIBLE ON DISK ENTER AS MUCH AS POSSIBLE ON DISK

s SEE INSTRUCTOR SEE INSTRUCTOR



ORGANIZE

YOUR TEAMs Set a time for team to meet that isSet a time for team to meet that is

convenient for all. I recommend your teamconvenient for all. I recommend your team

meetmeet weekly. Each member should reportweekly. Each member should reporton progresson progress

s WRITE OR CALL COMPANY. ASK FOR:WRITE OR CALL COMPANY. ASK FOR:

x 5 years of annual reports and/or 10K 5 years of annual reports and/or 10K x Latest proxyLatest proxy

x 10Qs since last 10K 10Qs since last 10K

x Recent press releasesRecent press releases



USING INTERNET SOURCES

s Find out the TICKER of your companyFind out the TICKER of your company

s Look on course home pageLook on course home page

s Click on Internet home pages for financialClick on Internet home pages for financial

data, price information and current news ondata, price information and current news on

your company.your company.

s Download relevant material so you have aDownload relevant material so you have a

hard copy to show instructor hard copy to show instructor



SEE INSTRUCTOR

s I will assist you in interpreting outputI will assist you in interpreting output

s I need the following:I need the following

:

x Copy of your disk Copy of your disk

x Hard copy printoutHard copy printout

x Copy of annual or 10K Copy of annual or 10K

x Data on your company, the industryData on your company, the industry

environment, and selected competitors. I willenvironment, and selected competitors. I will

help you pick benchmarking companies.help you pick benchmarking companies.



THE EXCEL SPREADSHEET

s COPY THE DISK ICOPY THE DISK I

GIVE EACH TEAM.GIVE EACH TEAM.

MAKE MULTIPLEMAKE MULTIPLECOPIES AND RETURNCOPIES AND RETURN

ORIGINAL TOORIGINAL TO

INSTRUCTOR INSTRUCTOR ..

s

Enter data in theEnter data in theYELLOW CELLS inYELLOW CELLS in

your Excelyour Excel

spreadsheet.spreadsheet.

s Use the last 10K 5 year Use the last 10K 5 year

summary page for summary page for

historical data that ishistorical data that is“Pro-forma.”“Pro-forma.”

s SHOW ME OUTPUTSHOW ME OUTPUT

s DODO NOT NOT ENTER ENTER

DATA IN ANY CELLDATA IN ANY CELL

EXCEPT YELLOWEXCEPT YELLOW

CELLS!!CELLS!!



CHECKLIST ON EXCEL DISK

FIN 3403FIN 3403

s Complete ratioComplete ratio

analysisanalysis

s Industry overview andIndustry overview and brief history brief history

s Check recent news andCheck recent news and

chart of stock chart of stock

s Prepare 15 MINPrepare 15 MIN

PowerpointPowerpoint

presentation/handouts presentation/handouts

FIN 3404FIN 3404

s More advanced ratioMore advanced ratio

analysisanalysis

s Complete EPSComplete EPSforecast(Fin 3403forecast(Fin 3403

students can do this for students can do this for

extra credit)extra credit)

s Stock ValuationStock Valuation

s BenchmarkingBenchmarking

s 20 MIN PPT20 MIN PPT

Presentation/ handoutsPresentation/ handouts



ENTERING DATA IN EXCEL

SPREADSHEETs Use most recent financial reports. StartUse most recent financial reports. Start

with last year and work back,with last year and work back,

s Get price data, P/E, and LTM E.P.S. fromGet price data, P/E, and LTM E.P.S. from

recentrecent Wall Street JournalWall Street Journal

s See instructor with questions. GiveSee instructor with questions. Give

yourself plenty of time to assemble data onyourself plenty of time to assemble data on

company, the industry and the competiton.company, the industry and the competiton.



CHECK YOUR DATA

s SPREADSHEET HASSPREADSHEET HAS

DIAGNOSTICS TODIAGNOSTICS TO

GUIDE YOU.GUIDE YOU.s DO RATIOS MAKEDO RATIOS MAKE

SENSE?SENSE?

s ARE REVENUE ANDARE REVENUE AND

EXPENSE ITEMSEXPENSE ITEMS

GROWING ATGROWING AT

CONSISTENTCONSISTENT

RATES?RATES?



IMPORTANT CONCEPTS

s ALWAYS EXCLUDEALWAYS EXCLUDE

EXTRAORDINARYEXTRAORDINARY

ITEMS.ITEMS.s BE SURE DATA ISBE SURE DATA IS

CONSISTENT (PRO-CONSISTENT (PRO-

FORMA)FORMA)

s ADJUST FOR ANYADJUST FOR ANY

RECENT SPLITS OR RECENT SPLITS OR

STOCK DIVIDENDSSTOCK DIVIDENDS

s READ THE CEOREAD THE CEO

LETTER. WHAT ISLETTER. WHAT IS

HIS STRATEGY?HIS STRATEGY?DID HE DO WHATDID HE DO WHAT

HE PROMISED INHE PROMISED IN

OLDER ANNUALOLDER ANNUAL

REPORT LETTERS?REPORT LETTERS?s IS THE AUDITIS THE AUDIT

UNQUALIFIED?UNQUALIFIED?



TIPS IN USING 10K 10K=ANNUAL, 10Q = QUARTERLY

s IF LT DEBT INTERESTIF LT DEBT INTEREST

IS NOT BROKEN OUTIS NOT BROKEN OUT

IN FOOTNOTES, USEIN FOOTNOTES, USE

TOTAL INTERESTTOTAL INTEREST

s R&D OR CAPITALR&D OR CAPITAL

SPENDING ISSPENDING IS

USUALLY FOUND INUSUALLY FOUND IN

CASH FLOW STMT.CASH FLOW STMT.s 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.

s TRY AND FINDTRY AND FIND

MACRO-GROWTH OFMACRO-GROWTH OF

EACH SEGMENT OFEACH SEGMENT OF

SALES.SALES.

s E.P.S. GROWTHE.P.S. GROWTH

SHOULD BE => SALESSHOULD BE => SALES

GROWTH. P/E IS TIEDGROWTH. P/E IS TIED

TO GROWTH.TO GROWTH.s READ FOOTNOTES.READ FOOTNOTES.

s R.O.E IS THE MOSTR.O.E IS THE MOST

IMPORTANT RATIO.IMPORTANT RATIO.



TREND ANALYSIS

s LOOK AT SALESLOOK AT SALES

SEGMENTS ANDSEGMENTS AND

MARGINS. WHICHMARGINS. WHICHIS GROWINGIS GROWING

FASTEST.FASTEST.

s USING YOUR USING YOUR

FINANCIALFINANCIALCALCULATOR,CALCULATOR,

CHECK GROWTHCHECK GROWTH

OF SALES ANDOF SALES AND

EXPENSES.EXPENSES.

?



ORGANIZATIONAL TIPS

s One team member One team member

should be in charge of should be in charge of

operating the PC andoperating the PC andslides. This personslides. This person

may also work onmay also work on

preparing the slides. preparing the slides.

s Two members shouldTwo members should be responsible for be responsible for

entering data from 10K entering data from 10K

s One person should getOne person should get

current prese releasescurrent prese releases

and price chart.and price chart.Another may assist inAnother may assist in

getting industry data.getting industry data.

s One team member One team member

should prepare DuPontshould prepare DuPontModel which is onModel which is on

your diskette.your diskette.

s

COPY ALL FILESCOPY ALL FILES



INDUSTRIAL COMPANY

RATIOS (see Lec Notes appendix)s INCOME STMTINCOME STMT

x GROSS MARGINGROSS MARGIN

x OPERATING MARGINOPERATING MARGIN

x PRETAX MGNPRETAX MGN

x NET MGN NET MGN

x INVENTORYINVENTORY

TURNOVER TURNOVER

x TOTAL ASSETTOTAL ASSETTURNOVER TURNOVER

s MARKET RATIOSMARKET RATIOSx P/EP/E

x PRICE / BOOK PRICE / BOOK (BVPS)(BVPS)

s BALANCE SHEETBALANCE SHEETx CURRENT RATIOCURRENT RATIO

x QUICK RATIO (ACIDQUICK RATIO (ACID

TEST)TEST)

s P&L + BAL SHEETP&L + BAL SHEET

x ROEROE

x

ROAROAs CAP. STRUCTURECAP. STRUCTURE

x X INTEREST EARNEDX INTEREST EARNED

x LT DEBT / ASSETSLT DEBT / ASSETS

x

LT DEBT / EQUITYLT DEBT / EQUITY



WHAT IS THE “STORY”?

s WHAT ARE YOUR WHAT ARE YOUR

CONCLUSIONS?CONCLUSIONS?

USE RATIO DATAUSE RATIO DATATO SUPPORT YOUR TO SUPPORT YOUR

CONCLUSIONS.CONCLUSIONS.

s WOULD YOUWOULD YOU

INVEST IN THISINVEST IN THISCOMPANY NOW?COMPANY NOW?

WHY OR WHY NOT?WHY OR WHY NOT?



PRESENTATION SLIDES

SEQUENCE (each company is unique)

1. Brief company recent1. Brief company recent

historyhistory

2. Trend analysis2. Trend analysis2. Interpret ratio data2. Interpret ratio data

3. DuPont model3. DuPont model

4. Benchmarking with4. Benchmarking withcompetitors usingcompetitors using

CompustatCompustat

5. Assumptions in your 5. Assumptions in your

forecastforecast

6. Recent news or events6. Recent news or eventsimpacting your impacting your

companycompany

7. Stock chart and price7. Stock chart and price

trends (THIS MAYtrends (THIS MAY

BE DOWNLOADED)BE DOWNLOADED)



TREND ANALYSIS

s SPREADSHEETSPREADSHEET

LOOKS AT 5 YR LOOKS AT 5 YR

GROWTHGROWTHs USE FINUSE FIN

CALCULATOR TOCALCULATOR TO

LOOK AT TRENDLOOK AT TREND

LINE GROWTH IN:LINE GROWTH IN:x ASSETSASSETS

x SALESSALES

x NET INCOME NET INCOME

x L.T DEBTL.T DEBT

x

B.V.P.S.B.V.P.S.s DO A COMPARISONDO A COMPARISON

OF YOUR OF YOUR

COMPANY ANDCOMPANY AND

SEVERAL KEYSEVERAL KEYCOMPETITORSCOMPETITORS

USING LINE OR USING LINE OR

BAR CHARTSBAR CHARTS



TEAM CLASS PRESENTATION

s DEVELOP A SCRIPTDEVELOP A SCRIPT

s ASSIGN ONE TEAMASSIGN ONE TEAM

MEMBER TOMEMBER TOOPERATE PCOPERATE PC

s ONE OR MOREONE OR MORE

TEAM MEMBERSTEAM MEMBERS

CAN DO PARTS OFCAN DO PARTS OF

THETHE

PRESENTATIONPRESENTATION

s TIME YOUR TIME YOUR

PRESENTATIONPRESENTATION

s PREPARE APREPARE AHANDOUT FOR HANDOUT FOR

CLASSCLASS

s GIVE INSTRUCTOR GIVE INSTRUCTOR

CLASS HANDOUTCLASS HANDOUT

AND ALL SLIDES +AND ALL SLIDES +

SPREADSHEET &SPREADSHEET &

10k --10k --PUT IN A FOLDER PUT IN A FOLDER



JUST DO IT!

s DRESSDRESS

PROFESSIONALLY.PROFESSIONALLY.

s WATCH YOUR WATCH YOUR TIME.TIME.

s ENCOURAGEENCOURAGE

QUESTIONS ANDQUESTIONS AND

DISCUSSION AFTER DISCUSSION AFTER

FORMALFORMAL

REMARKS.REMARKS.



USING POWERPOINT

s ICONS AT BOTTOMICONS AT BOTTOM

OF SCREENOF SCREEN

x

SLIDE EDIT VIEWSLIDE EDIT VIEWx OUTLINEOUTLINE

x SLIDE SORTER (youSLIDE SORTER (you

can move slidescan move slides

around)around)x SCRIPTSCRIPT

x FULL VIEW --FULL VIEW --USEUSE

FOR PRESENTATIONFOR PRESENTATION

s PPT IS EASY ANDPPT IS EASY AND

FUNFUN

s EXPERIMENT WITHEXPERIMENT WITHICONS AND SOUNDICONS AND SOUND

EFFECTSEFFECTS

s BE SURE FONTSBE SURE FONTS

ARE LARGEARE LARGE

ENOUGH TO BEENOUGH TO BE

SEEN AT BACK OFSEEN AT BACK OF

ROOMROOM



USING MS POWERPOINT

s Computer labs for Computer labs for

UCF use WINDOWSUCF use WINDOWS

NT. Classroom NT. Classroomcomputer uses this ascomputer uses this as

well.well.

s Try and save your fileTry and save your file

in Windows NTin Windows NT(1997). Make multiple(1997). Make multiple

copies.copies.

s Load your presentationLoad your presentation

on the PC before classon the PC before class

on the C drive.on the C drive.s Be sure and test slidesBe sure and test slides

to be sure everythingto be sure everything

works.works. IF YOU SAVEIF YOU SAVE

DATA IN AN EARLIER DATA IN AN EARLIER VERSION OFVERSION OF

WINDOWS YOU MAYWINDOWS YOU MAY

HAVE A PROBLEMHAVE A PROBLEM



SAVE REPORT FOR JOB

INTERVIEWSs MAKE A COPY FOR MAKE A COPY FOR

EACH TEAMEACH TEAM

MEMBER MEMBER s PUT ON YOUR PUT ON YOUR

RESUME THAT:RESUME THAT:

x YOU AREYOU ARE

PROFICIENT IN MSPROFICIENT IN MSEXCEL ANDEXCEL AND

POWERPOINTPOWERPOINT

s DO AN ANALYSISDO AN ANALYSIS

OF EACH PUBLICOF EACH PUBLIC

INDUSTRIALINDUSTRIALCOMPANY THATCOMPANY THAT

YOU PLAN TOYOU PLAN TO

INTERVIEW WITHINTERVIEW WITH

s GIVE INTERIEWER GIVE INTERIEWER COPY OF ANALYSISCOPY OF ANALYSIS



TEAM PEER EVALUATION

s I AM NOT A POLICEMAN. YOUR I AM NOT A POLICEMAN. YOUR

TEAM ORGANIZATION IS UP TO YOU.TEAM ORGANIZATION IS UP TO YOU.

s II AMAM INTERESTED IN MAKING SUREINTERESTED IN MAKING SURE

THATTHAT ALLALL TEAM MEMBERS WORK.TEAM MEMBERS WORK.

s PLEASE SEE ME WITH ANYPLEASE SEE ME WITH ANY

PROBLEMS. DO NOT WAIT UNTILPROBLEMS. DO NOT WAIT UNTILEND OF THE TERM! SET MEETINGEND OF THE TERM! SET MEETING

TIMES THAT WORK FOR ALLTIMES THAT WORK FOR ALL

MEMBERS.MEMBERS.



FIN 3404 COMPANY

ANALYSIS PROJECT

PROF DIGGLEPROF DIGGLE

ADDITIONAL ADVANCEDADDITIONAL ADVANCEDCONCEPTSCONCEPTS



READING THE WSJ

s SEE LEC NOTES PP.SEE LEC NOTES PP.

43-4443-44

s SEC C:SEC C:x LEFT COL-PG 1LEFT COL-PG 1

FINANCIAL MKTSFINANCIAL MKTS

x TREASURY BONDS,TREASURY BONDS,

NOTES AND BILLS NOTES AND BILLSx AGENCIESAGENCIES

x NYSE STOCK NYSE STOCK

QUOTESQUOTES

x NASDAQ NASDAQ

s SEC C CONTDSEC C CONTD

x DOW JONESDOW JONES

AVERAGESAVERAGESx CHARTSCHARTS

x READING A STOCK READING A STOCK

QUOTE ON YOUR QUOTE ON YOUR

COMPANYCOMPANYs SEC B--THE MARTSEC B--THE MART



FORECASTING

1. Determine1. Determine

segments--I will assistsegments--I will assist

2. Develop an estimated2. Develop an estimatedgrowth rate for eachgrowth rate for each

segment salessegment sales

3. Develop an estimated3. Develop an estimated

margin for eachmargin for each

segment based on thesegment based on the

corporate wide margincorporate wide margin

4. Spreadsheet will4. Spreadsheet will

develop a forecast.develop a forecast.

You should know whatYou should know whatE.P.S. were for the pastE.P.S. were for the past

year. Adjust your year. Adjust your

growth rates togrowth rates to

coincidecoincide5. Fine tune forecast.5. Fine tune forecast.

This is a trend lineThis is a trend line

forecast only.forecast only.



VALUATION

s Complete DividendComplete Dividend

Discount Model (partDiscount Model (part

of Excel spreadsheet)of Excel spreadsheet)s Complete DuPontComplete DuPont

ModelModel

s Chart the stock. YouChart the stock. You

may be able tomay be able to

download this. Use a 5download this. Use a 5

year chart if possible.year chart if possible.

s Compare the currentCompare the current

price with DDM value. price with DDM value.

s Compare P/E and PriceCompare P/E and Priceto BVPS withto BVPS with

historical data andhistorical data and

industry norms.industry norms.

s WOULD YOU BUYWOULD YOU BUY

THIS STOCK NOW?THIS STOCK NOW?

company analysis -- prof diggle

Documents