In order to avoid complications, students may go by the following criteria in picking a company for analysis:
• Pick a large publicly traded company based in North America.
• Key financial statements are available for the past 3/5 years
• Product lines fall (broadly) in one industry rather than spanning across different industries.
• The company did not go through (MAJOR) mergers and/or acquisition in last 3/5 years
• Competitors are mainly North American (cross-comparison will be relatively easier).
STRUCTURE OF A COMPANY REPORT
A. Background
• When founded, when listed
• Major lines of business
• Market share
• Ranking within industry (e.g., largest of four companies...)
• Exports
• Major institutional owners (if any), part of a group?
• Number of employees/shareholders
• Known as a major blue chip?
B. Major Factors
1. Valuation
• How do P/E, dividend yield, P/sales, and P/BV compare with the market and industry?
• Is P/E, etc., attractive in view of growth prospects?
• Do stock prices reflect changes in the company? Historical stock prices.
2. Earnings Growth and Potential
• Cyclical or stable earnings?
• Do market conditions/economy favor growth?
• Is earnings growth accelerating? Why? Temporary or sustainable?
• Sales growth or margin expansion? Why? Sustainable?
• Is company expanding? Are capital expenditures adequate?
• Does company invest in R & D?
3. Financial Condition
• Healthy/stable operating margin, ROE, ROA?
• Acceptable debt/equity, current ratio, interest coverage? Improving or deteriorating?
• Adequate asset turnover?
• Can capital expenditures be financed adequately?
4. Market/International competitiveness
• Is market changing? Growing? Defining?
• What factors make the company/country internationally competitive (labor costs, technology, raw materials, energy, “piggy back” on well-developed industry?
• Who are its world-class competitors in the same country? Abroad? What countries?
5. Management
• Does management have a clear strategic vision? Does vision make sense?
• Is the founder still the manager? How much is the family involved?
• Is there a level of professional managers? What is their reputation?
6. Cost Structure
• Are prices of raw materials likely to fall/increase?
• Major changes in productivity?
• Does a planned expansion offer economies of scale? Or does financing raise interest costs too much in comparison with world-class competitors?
WEB SITES WITH EARNINGS INFORMATION
1. The following web sites have earnings estimates in their company reports:
Zacks http://my.zacks.com/
Investor Guide http://www.investorguide.com/
Market Guide http://www.marketguide.com/
Bloomberg http://bloomberg.com/
Motley Fool http://www.fool.com
An often forgotten part of learning is the university library. They have valuable documents, electronic reserves, first search database and ProQuest Direct – all these are invaluable tools in doing research and students are encouraged to make good use of them.
2. If you are looking for the earnings announcements released each quarter by companies, then the best source of information are the news wires. Most of the web sites in the list above include a link to news about a company. StockMaster includes news wire “earnings announcements” in its company reports at its site at www.stockmaster.com/
While there are sites on the web that address industry research, they do not include financial data. exs are Hoovers Industry Snapshots at http://www.hoovers.com/ or Industry reports on http://corporateinformation.com/. The closest you can come would be The Forbes 500 at http://www.forbes.com/tool/toolbox/forbes500s/ .
Notes:
1. Company report should not exceed 30 pages (double spaced, font 12) including appendices, tables and charts.
2. If you are using web sites for part of your company report, cite them properly. You can only use information available in the public domain. In other words, you cannot refer to password protected web sites as references.