Summary of why the analyst believes the stock

Assignment Help Corporate Finance

Reference no: EM132404344 , Length: word count:2100

Group project - Applied Corporate Finance

Every group has to prepare an equity research report with in maximum of 10 pages. Every group has to have a maximum of 4 students. An equity research report is a document that provides a recommendation on whether investors should buy, hold, or sell shares of a public company. Additionally, it provides an overview of the business, the industry it operates in, the management team, its financial performance, risks, and the target price.

The group has to go and select one of the Dow Jones Index listed firm firms. The accounting and finance data about the index and the firms listed in this index can be found in either "YAHOO FINANCE" or "GOOGLE FINANCE".

The contents of an Equity Research Report are as follows:

Recommendation - Typically to either buy, sell, or hold shares in the company. This section also usually includes a target price (i.e., $47.00 in the next 12 months).

Company Update - Any recent information, new releases, quarterly or annual results, major contracts, management changes, or any other important information about the company.

Investment Thesis - A summary of why the analyst believes the stock will over or underperform and what will cause it to reach the share price target included in the recommendation. This is probably the most interesting part of the report.

Executive summary - brief back ground information about the firm and how the firm is doing over years historically.

Financial analysis - Using the financial ratio analyses, you have to provide summary of the financial performance of the firm by implementing over time analysis of liquidity, profitability, activities, leverage and market values ratios.

Financial Information & Valuation - A forecast of the company's income statement, balance sheet, cash flow, and valuation. This section is often an output from a financial model built in Excel. You may be required to find the cost of capital of the subject firm.

Under "Market Summary", you will find the yield tp maturity for 10-year Treasury bonds listed as "10 Yr Bond(%)". Collect this number as your risk-free rate. Then you can use it in the CAPM equation to calculate the cost of equity capital. To get the cost of debt you need to find the market value of the firm's long term debt and then you have to find the price and yield to maturity on the firm's existing long term bonds. Go to finra website. Click on "investors" and then on "Market data" and after that click on "Bonds". Under Quick Bonds Search" click "Corporate", type the symbol of the subject firm and click search. After the results come up, use the yield to maturity on non- callable 10-year obligations as its cost of debt capital.

Reference no: EM132404344

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