Project
You will select two companies to analyze and complete an 8-page report. Please read the document to determine the requirements for this report.
The Companies are Amgen and Allergan
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2011
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2012
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2013
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2014
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2015
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LIQUIDITY RATIOS
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Current Ratio
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Quick Ratio
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LEVERAGE RATIOS
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Liabilities-to-Assets Ratio
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Debt Ratio
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COVERAGE RATIOS
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Times Interest Earned Ratio
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EBITA Coverage Ratio
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ASSET UTILIZATION RATIOS
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Average Collection Period (days)
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Inventory Turnover Ratio
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Fixed Asset Turnover Ratio
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Total Asset Turnover Ratio
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OPERATION RATIOS
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Gross Profit Margin
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Operating Profit Margin
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Net Profit Margin
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MANAGEMENT PERFORMANCE
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Return on Equity
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Return on Assets
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OTHER RATIOS
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Shares Outstanding
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Market Capitalization
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Dividends/Share
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Earnings/Share
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Now that you have analyzed the financial data of these stocks, further assess the risk of the companies in question.
In addition to the ratio analysis, gather the following information using Morningstar, Mergent Online, or another online database like Yahoo Finance or Google Finance:
- Historical returns (either negative or positive) for the past five years
- The difference between historical returns for each of the past five years (i.e. Tesla vs. Honda)
- Growth of a $10,000 investment for each company given the past five years
- The standard deviations of each company
- Using historical return information, find the expected average rate of return for each company
- Illustrate the potential rate of return outcomes using a bell-shaped curve (i.e. there is a 95% chance that the rate of return for the next year will be between -x% and +x%)
- Given a 50/50 investment in each company stock, please provide me with the historical performance of that particular portfolio
- Using Excel, please provide correlation coefficient of the 2-stock portfolio
- Identify the betas of each stock
- Please provide what you think the required rate of return for each stock is. You will want to use the CAPM method to determine this.
- Lastly, aside from the quantitative methods of determining risk, please provide qualitative data-items which could occur which would increase or decrease the amount of risk of that stock over time (i.e. regulatory issues, products no longer being relevant, etc.)
REQUIRED: Written report
Please provide an 8 Page report which includes an analysis of their financial statements, ratios, and the risks associated with each company - including thoughts on the trends that you have identified as important. Be sure that the commentary addresses the following:
• What specifically the trends are telling us
• What is likely causing the change in ratios
• Why we should be concerned and/or focused on these trends
Identify pricing multiples for these companies. This would include price-to-sales, price-to-earnings, and price-to-book ratios for the past few years. These pricing multiples can provide us with insight on how investors feel about a specific investment. Do investors have confidence in the company's management or not? Has that confidence changed over time? Why do you think that it has changed?
There will not be a presentation due for this project. Analysis should cover all of the topics above as well as provide insight as to why you believe that certain qualitative factors will affect the risk and therefore the rate of return for certain stocks.
Included in the analysis should be the sources for which you based your opinion. These sources could be qualitative (news articles, analyst's reports, etc.) or quantitative (audited financial statements, ratios, etc.).