The company's you select should be a publicly held company and be listed on a U.S. stock exchange. Your approach should include a discussion of the company's business model, core products or services, growth prospects and key cost items. If the company that is selected is engaged in foreign markets you will need to discuss the potential for growth of those markets and any special risks those markets may pose, and risk management techniques for managing those risks effectively.
The ultimate goal is to decide which company is best positioned to provide the most shareholder value in the future. This would require you to conduct the following analysis:
1) Identify an industry to focus on (It is suggested that you use an industry that is expanding rather than consolidating, but the choice is yours to make). Explain why you chose this industry.
2) Identify the top companies in the industry using your own selection of criteria (market capitalization, ROE, or any other financial criteria you wish to develop.) Your decisions on which set of criteria to use, are to be considered part of the project and your rationalization must be explained.
3) Compile a ratio analysis of the top competitors in the industry using the company's financial statements. You may wish to utilize some of the "managerial" financial statements that your textbook illustrates, such as the Managerial Balance Sheet. You should limit the number of companies you are researching to between 3-5.
The ratio analysis should include:
a) a 5 year trend analysis of each company selected and compared to the industry averages and
b) a competitive analysis of the selected major competitors using four main standards: profitability, liquidity, debt and return on equity.
4) Establish growth projections for the top competitors using established methods, including pro forma income statements and balance sheets for the coming year.
5) Analyze the following elements of the major competitors:
[It is expected that you will discuss why you selected the measures used, interpret the data and explain what this information suggests about the company's financial situation and future financing needs.]
a) Each company's capital structure
b) Cost of capital, capital structure, CAPM, cash flow, value of common stock and MVA.
6) You are expected to look at a potential takeover target for the company (within the industry or closely related to the industry), evaluate the takeover and the price to be paid for the target using established valuation criteria. It is expected that you will discuss the selection of the criteria used and to comment on its relative value in the analysis.