Stock Analysis:
You will evaluate an individual dividend paying company. Your goal is to write a convincing report that demonstrates reasons for buying or selling short the company chosen.
Calculate the following ratios for your company.
(Show all of the numbers used in calculation using the attached financial reports)
a. Current ratio
b. Quick ratio
c. Total debt ratio
d. Equity multiplier ratio
e. Inventory turnover
f. Total asset turnover
g. Profit margin
h. Return on Assets
i. Return on Equity
j. Market-to-Book
k. Price-to-Earnings
Use SML equation to calculate the required return on your stock.
Use 10 year Treasury rate for risk free rate (use historical return(your book is a good place to find this number)).
Use an average market return for expected return on market (at least 50 years (your book is a good place to find this number)).
Use the current beta( many sources like Yahoo Finance).
Use the constant growth formula to calculate the required return on your stock.
To estimate g, take the next 5-year earnings per share annual growth rates or a similar estimation. (Value Line)
Find current market price in WSJ.
Use for D0, the indicated annual dividend.
Do a SWOT (strengths, weaknesses, opportunities, and threats) analysis.
Use technical analysis (charting) to see if any information about future prices can be found.
Use both plus any outside information (analyst reports, etc.) to make an argument that the current price is undervalued, overvalued or accurately priced. You are trying to convince me you are correct in your analysis. Use anything argument you believe supports your conclusion.