The report should analyze the firm and its common stock and come up with a buy, sell, or hold recommendation for the stock. The analysis must be based on the most recent information available about the company. As part of the report, you must include the following:
â— A brief overview of the firm, including a discussion of its business operations. (This should be only 1 to 2 pages.)
â— An analysis of the firmâ€™s industry and of the economy in general and the industry that your firm belongs to, including major factors which may affect the firm. (1 to 2 pages), following the top-down approach to fundamental analysis.
â— An analysis of the firmâ€™s financial statements including discussion of relevant financial ratios. The discussion of the financial ratios should include an analysis of trends over time and comparison to competitors. (1 to 3 pages)
â— Based on the above analyses, you must make earnings projection for the firm for the next year.
â— Estimate an appropriate required return for investors on the stock (using your own calculated beta value performed in Part I of this assignment).
â— You must determine an appropriate price for the stock of the firm. This is the crucial part of the project and you will base your buy/sell/hold recommendation on this. You may use any approach you feel is applicable: DDM, FCFE or FCFF (and perhaps more than one); they are discussed in the textbook and will be discussed in class. Your valuation should be based on the analysis conducted in the previous parts and be logically consistent with it. You must justify the approach or approaches you take to value the stock, justify (based on your previous analysis) any assumptions you make, and discuss any limitations of your analysis.
The written report must be no more than 10 pages in total (including any tables, graphs et cetera). For any sources of information you use, you must cite the source using footnotes and a references section. Please note: for your analysis you cannot simply repeat what was written in the firmâ€™s annual report or copy other reports you find on the internet or elsewhere. The report must be in your own words and involve our own critical analysis of the firm. It is expected that the report will involve original thinking. You can make reference to ideas you have found elsewhere (the source must be cited), however, any group caught plagiarizing (including cutting and pasting from websites, copying othersâ€™ words from any source without appropriate citation, or any other form of plagiarism) will be punished to the fullest extent possible.
Your written report will be evaluated based upon:
â— the thoroughness with which the requirements are fulfilled
â— the level of effort apparent in the report
â— the logical justification of the assumptions you make and the conclusions drawn
â— judgement and originality of thought
â— logical consistency of the report
â— the overall level of professionalism with which the report is presented