Financial Analysis & Valuation - Lyons Case Studies Assignment -
Case - Financial Analysis
Context: You were recently hired as a research analyst at a small asset management firm specializing in value oriented portfolios. Your task is to select two firms from the restaurant industry (other than MCD - the firm used in class) and perform a financial analysis that compares MCD and the two firms you selected. You must prepare an Excel file and PowerPoint deck (under 20 slides) that you would present to the Investment Committee. You may include notes in the PPT slides if you think additional info is required. The goal is to analyze the industry and identify the firm that is most suitable for a credit investment and the firm that is the best equity investment. You must include the following in your analysis. You may work alone or in pairs on this assignment.
1. Begin with a fundamental analysis of the industry including a summary of how the industry operates, sources of competitive advantage, key players etc. from your industry research. This should be no more than 3 slides.
2. Select 2 firms to analyze and compare to MCD. Create an excel spreadsheet to include: the balance sheet, income statement and key information from the statement of cash flows for three years. In order to do this you will need to find older 10Ks for the earlier information. You MUST "clean" the earnings numbers of any non-recurring items. Remember to complete all subtotals using formulas and check these against the published numbers.
3. Compute and analyze key financial measures and ratios. How do the firms compare? Describe each firm's relative strengths and weaknesses.
4. Which firm is the best credit candidate? Which 3 or 4 metrics/ratios did you rely on most heavily to make your choice? Why?
5. Ignoring current valuations (i.e. assume all firms are currently fairly valued), which firm is the best equity candidate for a portfolio planning to hold the investment for 3 to 5 years? Which 3 or 4 metrics/ratios did you rely on most heavily to make your choice? Why?
6. Are there any issues related to quality of management that should be considered?
7. Are there any issues related to corporate social responsibility that should be considered?
8. Identify key risks and concerns.
Note - Please provide analysis between MCD & (Denney's and Red Robin).