Company Analysis - Project Description

The purpose of this project is to apply class concepts and techniques on a real company while integrating the Bloomberg information technology system.

Assume the role of a consulting firm when preparing the report to be addressed to the management of the company. While you can use your creativity and judgment in deciding on the exact format, the report should look professional (you should feel comfortable presenting it to the CEO of the company!) and be based on the following steps:

1. Select the company your group is interested in. This should be a publicly traded non- financial company with at least 3 years of trading history and 3 sets of annual financial statements. Avoid money loosing companies and REITS. If in doubt about your company choice, please clear it out with your instructors.
2. Obtain the company's three most recent filings and annual reports.
3. Describe the company. Make sure you understand the company (industry prospects, competitive position, and corporate strategies).
4. Corporate governance analysis: does this company have a separation between management and ownership (controlling or minority ownership)? What other potential conflicts of interest if any do you see in this firm? How does the company manage its image in society?(look at the company's corporate actions, insider trading, institutional ownership, etc.)

1

1. Income statement: examine the last 3 (common size) annual Income Statements. How do expenses affect Net Income? (consider cost of goods sold, selling & general expenses, depreciation, interest, taxes). Compare the income statements from last 3 years and make at least 5 observations.
2. Balance sheet: examine the last 3 (common size) annual Balance Sheets. What is the relation of assets to: cash and cash equivalents, inventory, account receivable? What is the relation of Total Liabilities and Shareholder Equity to: long term debt, equity, retainedearning? Comment on the company's capital structure choices. Compare the balance sheetsfrom last 3 years and make at least 5 observations.
3. What is the cash flow from assets for the most recent year? Describe your company's cashflows for the most recent year.
4. Describe the company's capital structure as well as its credit ratings. Explore and describe the company's most recent bond issue if available.
5. Ratio Analysis: Evaluate the company using ratio analysis. Make sure to include liquidity, financial leverage, asset management, profitability and market value ratios. Compare your company to industry peers (justify the choice of peer companies). Make at least 5 observations.
6. Evaluate the cash cycle of the company (CCC) and compare it to that of the industry leader or to the industry average.
7. Using the information from the most recent annual financial statements, what is the internal growth rate for your company? What is the sustainable growth rate? What do these numbers mean?
8. How much cash did this company return to its stockholders over the last 3 years? How doesthis company's dividend policy compare to those of its peer group?
9. Calculate the price of the stock using the dividend growth model and the CAPM.
10. Given the price you calculated, and the financial ratio analysis make an investment recommendation (decision) on the stock of that company (buy, sell or hold).
11. (Bonus) Identify key drivers of value for your company and recommend two changes for increasing shareholder value.