Company Analysis

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Company Analysis – Project Description
The purpose of this project is to apply class concepts and techniques on a real company while integrating
the Bloomberg information technology system.
Assume the role of a consulting firm when preparing the report to be addressed to the management of the
company. The report should be maximum 10 pages (single-spaced), not including any appendices. While
you can use your creativity and judgment in deciding on the exact format, the report should look
professional (you should feel comfortable presenting it to the CEO of the company!) and be based on the
following steps:
1. Select a company your group is interested in. This should be a publicly traded non-financial
company with at least 3 years of trading history and 3 sets of annual financial statements. Avoid
money loosing companies and REITS. If in doubt about your company choice, please clear it with
your instructor.
2. Obtain the company’s three most recent income statements and balance sheets.
3. Briefly describe the company (1-2 paragraphs). Make sure you understand the company (industry
prospects, competitive position, and corporate strategies).
4. Income statement: examine the last 3 (common size) annual Income Statements. How do expenses
affect Net Income? (consider cost of goods sold, selling & general expenses, depreciation, interest,
taxes). Compare the income statements from last 3 years and make at least 5 observations.
5. Balance sheet: examine the last 3 (common size) annual Balance Sheets. What is the relation of
assets to: cash and cash equivalents, inventory, account receivable? What is the relation of Total
Liabilities and Shareholder Equity to: long term debt, equity, retained earning? Compare the
balance sheets from last 3 years and make at least 5 observations.
6. Calculate the cash flow from assets for the last two years. Show the operating cashflow, net
capital spending, and change in net working capital components. Comment on the trend.
7. Describe the company’s capital structure (mix of common equity, preferred equity, and long-term
debt). Explore and describe the company’s two most recent bond issues if available. If they have
different yields, explain why.
8. Ratio Analysis: Evaluate the company using ratio analysis. Make sure to include liquidity,
financial leverage, asset management, profitability and market value ratios. Compare your
company to industry peers. Make at least 5 total observations.
9. Using the CAPM, what is the required return on the firm’s common equity?
10. Calculate the theoretical price of the stock using the dividend discount model. You should use the
R calculated in part (9) in your equation. If your company doesn’t pay dividends, use comparable
valuation based on the comparator firms used in part (8).
11. Given the price you calculated in part (9) and the financial ratio analysis, make an investment
recommendation (decision) on the stock of that company (buy, sell or hold).

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