Financial Analysis Extra Credit Option

Financial Analysis Extra Credit Option
The objective of this assignment is to integrate your knowledge of financial analysis and valuation concepts learned in this class. Choose a publicly-traded company in which you have an interest as an investor. Here are SOME of the questions you will address in your report:
1.  To which industry/sector does this company belong?  What are the major issues facing this industry? Is your company a dominant player in the industry?
2.   What are the significant events, trends, and risk factors affecting the firm?
3.   Calculate the company’s financial ratios for the two most recent years, using the ratios introduced in Chapter 3, and addressing the company’s liquidity, operating efficiency, debt, and profitability.  Are there significant trends or changes in any of the ratios? To what do you attribute these trends or changes?
5.   If the company issues bonds, what is the credit rating on the company’s debt? Referring to Chapter 6, are the company’s bonds considered investment grade or “junk”? Compare the yield on the company’s bonds to the yield on similar Treasury bonds.  What is your best “guesstimate” of the estimated premium for default risk that the market is placing on these bonds?
6.   Does the company pay cash dividends on its shares? Based on Chapter 7, what is the company’s current payout ratio, dividend yield, and dividend growth rate?  Does the Dividend Growth Model do a good job of justifying the current market price of the company’s common stock? Why or why not?  Does the company return capital to investors in other ways, as through a share repurchase program?
7.   Compare your company’s required return based on the Security Market Line (per Chapter 11) with the expected return based on the analysts’ mean target price and expected dividends (per Chapter 7).  Do you expect the company to deliver value for an investor over the next year?  What assumptions have you made in reaching this conclusion?
8.  Make an investment recommendation based on the above research and analysis.

 
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