Choose a company to analyze and get the company approved by the instructor. You will want to choose a company that has positive earnings. It will also make your job easier if the company currently pays a dividend. Companies will only be assigned to one student.
Prepare a report analyzingone stock
Support data must be included in addition to the actual report. You are free to use any other sources for information. Your full report should also include any other source data referenced in your recommendations. For instance, if you quote an S&P research report or Morningstar stock report, they should be included as appendixes to your analysis. Any numbers presented in the report must include support data.
Calculations for valuation models should be in addendums. An Excel spreadsheet must also be incorporated in your report. More details on this requirement will be given later.
The following is a list of what to include.
I) The Story
A. What do they do?
B. What is the reason to buy them?
1. Better if it is a reason to buy now.
a. New Product / New Market
b. Economic Cycle
c. Theme
i. Aging of America
ii. Greening of America
II) Fundamental Analysis
A. Economic Analysis
1. Where are we in the economic cycle?
2. Are we in a growth or value cycle?
3. Are we in a large cap or small cap cycle?
B. Industry Analysis
1. What is going on in the stock's industry? What factors affect those companies.
2. Where is your stock in its industry? Largest? Smallest? Competitive advantages?
C. Company Analysis
1. Dividend Discount Models
A. K, You Can Use: rf = 1.0 - 3.0%, rm = 8 - 12% for large cap, rm = 12 - 16% for small cap
B. K, using the dividend discount model
C. g, using (ROE x b), Actual div growth, earnings growth, Div discount model
D. Growth Model Valuation
E. No Growth Model
F. Present Value of Growth Opportunities
G. Market implied Growth Rate
2. P/E analysis, trend and projections
A. Intrinsic P/E calculation
B. "Normal" P/E estimate
C. Projected Price using Normal P/E
D. Projected Price using Relative P/E (relative to the S&P 500)
3. Analysts earnings estimates/Opinion Ratings
4. Insider buying or selling
5. Financial Statement analysis
a. Cash trends and relative positions
6. Ratio Analysis - Trend and relative analysis
a. Price to book, current ratio, debt to equity
7. Trend Analysis of earnings
8. Optional: Any other concepts we have covered (short interest, option chain, etc,)
III) Technical Analysis (Include printed chart with trend and support lines indicated, if they exist)
A. Support and Resistance
B. Is it currently trending up or down?
C. Moving Average Analysis (optional)
V) Projections and recommendations
A. Predicted value at some point in the future
B. Calculate projected holding period return for a holding period of your choice
C. Recommended buy price if the stock is not currently a buy
D. Recommended target price
E. Recommended "stop loss" price
F. Risks to be aware of