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?
\nU.S. Bureau of Labor Statistics. Overview of BLS Statistics by Industry. https:\/\/www.bls.gov\/bls\/industry.htm
\nBoard of Governors of the Federal Reserve System. Industrial Production and Capacity Utilization. https:\/\/www.federalreserve.gov\/releases\/g17\/current\/default.htm
\nCheck for trade associations specific to the industry as well as current financial news articles (example: https:\/\/www.reuters.com\/business\/ has news for specific industry groups)
\nWhat are the significant events, trends, and risk factors affecting the firm? Be sure to consider the Environmental, Social, and Governance (\u201cESG\u201d) and sustainability issues demonstrated by this company.
\nAnnual Reports, Management Discussion & Analysis of Financial Condition and Risk Disclosures.
\nA list of the Board composition, with independent directors identified, is available at various sites. For example, Reuters describes the Campbell Soup board on the company page under the \u201cPeople\u201d tab at: https:\/\/www.reuters.com\/companies\/CPB.N . Note proportion of independent directors versus insiders; is the Chairman of the Board independent or is that role filled by the CEO?
\nYahoo publishes the Governance Quality Scores calculated by Institutional Shareholders Services (ISS) under the \u201cProfile\u201d tab for the company (scroll all the way down to the bottom). Scores are provided for the following risks: Audit, Board, Shareholder Rights, and Compensation.
\nYahoo also publishes the overall ESG ratings provided by Sustainalytics as well as the separate ratings for E, S and G, under the \u201cSustainability\u201d tab for the company.
\nExamine the company\u2019s financial ratios for the two most recent years, using the ratios introduced in Chapter 3, and addressing the company\u2019s 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?
\nThe following sites provide a trend analysis of popular ratios: https:\/\/stockanalysis.com\/stocks\/ (Search for company or symbol, then click on Financials\/Ratios); https:\/\/www.macroaxis.com\/
\nLook at the comparative ratios for your company. How do your company\u2019s financials measure up against their main competitors or industry group?
\nThe following site compares many popular ratios for the company and its industry: https:\/\/www.investing.com\/equities\/ (use search window for company page, then click on Financials\/ratios tabs)
\nFor the comparative ratios, focus on the Return on Equity and break it down as in the Dupont analysis (Chapter 3). Use the ROE and the dividend payout ratio to estimate the company\u2019s sustainable rate of growth. If possible, compare with a peer company or the industry.
\nReview your company\u2019s statement of cash flows for the past two years. Compare the cash flow from operating activities to the income from continuing operations. By how much do they differ, and why do they differ?
\nThe SCF should reveal the company\u2019s major resource decisions \u2013 are they investing in productive assets, are they paying dividends, are operating cash flows sufficient to cover these needs, or is external financing necessary?
\nWhat is the credit rating on the company\u2019s debt? Does the company pay dividends on its shares and\/or return capital to investors through a share repurchase program?
\nBest source for credit ratings and yields on company\u2019s outstanding bonds is the FINRA\/Morningstar site: https:\/\/finra-markets.morningstar.com\/BondCenter\/Default.jsp. This will lead you to the cost of debt for the company.
\nIf the company pays dividends, you can estimate the cost of equity using the dividend discount model (and applying the growth rate you calculated in #4 above). Whether or not the company pays dividends, you can use the CAPM\/SML formula to estimate the cost of equity\/required return. You will need this for #7 anyway!
\nMeanwhile, compute a weighted average cost of capital (WACC), and compare to the ROE you computed above. Think of it as the aggregate of capital budgeting decisions. Has the company created value for the shareholder? (If you have access to the Bloomberg terminals in the computer lab, use the WACC function and note the comparison to Return on Invested Capital (ROIC) and the Economic Value Added (EVA).)
\nCompare your company\u2019s required return based on the SML with the expected return based on the analysts\u2019 mean target price and expected dividends. Do you expect the company to deliver value for an investor over the next year? Longer-term?
\nA readily available source for Beta, analysts\u2019 mean target price, and forward dividends is Yahoo!Finance.
\nOther Article:<\/p>\n","protected":false},"excerpt":{"rendered":"
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? U.S.…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-42922","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/posts\/42922","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/comments?post=42922"}],"version-history":[{"count":0,"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/posts\/42922\/revisions"}],"wp:attachment":[{"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/media?parent=42922"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/categories?post=42922"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/academicwritersbay.com\/answers\/wp-json\/wp\/v2\/tags?post=42922"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}