During this block you will work on an investment report.
To guide you through this process, underneath you can find questions/topics that you can address. For calculations and graphs, use Excel. You can paste these into the Word document. Also indicate where you got your information from (so include a source list using APA standards)
It is truly important that next to the numbers, you provide underlying explanations! Quantitative data without qualitative elaborations is often meaningless.
- Company profile
Select a stock-listed company and provide the reader of your report with a company profile. Topics that you can address include: a brief history, the core business, size (production locations, number of employees), and structure (companies are usual split up in several business units). A split up of the sales/profit of the company by geographical region and/or by business unit might provide further relevant background info.
Also elaborate on how the company’s share price evolved. You can opt to use different time periods to illustrate this. Give the most important explanations for the fluctuations which can be noticed in your graphs/tables.
- Macro-analysis
Given the markets in which your company operates, describe the most important macro- economic developments.
You will have to analyse which macro events are most relevant to the stock/firm you are doing your research on. Relevant business cycles, GPD developments, interest rate and currency fluctuations, labour costs could all be subject of study in this section.
A future outlook is desired as well. - Sector-analysis
In this part of your report, you should look into the competitive landscape of your company.
Who are the competitors? Try to benchmark (normally through comparing relevant ratios and figures) your company with the key competition. - Company analysis
Through ratio analysis you should give a detailed analysis of your company’s performance.
Keep in mind that ratio analysis without elaboration, benchmarking or explanations is almost useless!
Make sure you collect data for enough years (at least 5 years). In presenting your data make use of tables and graphs. Select those ratios which you believe are most relevant to assess the company’s performance. - Gordon Growth Model/Stock Valuation Methods
Try to use the Gordon Growth Model to find a theoretical stock price of your company.
In doing so, analyse how the earnings per share evolved over time. Based upon the historical growth rate in the EPS try to come up with an estimation for the future growth rate.
Also indicate how you arrived at the other inputs of your model (the risk free rate and the expected dividends).
In case it doesn’t work out, try to adjust the figures/assumptions in a logical way.
Alternatively, you can look into other ways to value shares (e.g. looking at P/E multiples or other valuation methods). - Give an investment advice.
Based upon all the work done in the previous sections, give an advice whether a potential investor should buy, hold or sell the stock.
In doing so, it might also be worthwhile to look what other analysts say about this stock.