- Find a public company listed on NYSE or NASDAQ. The stock should have a closing price above $10 and a negative return (< -5%) from past year. You can get performance data from websites like finance.google.com, finance.yahoo.com, or morningstar.com. You can ignore any request for subscription. The free data would suffice the project need.
- Follow the guide in the appendix to collect financial data from www.morningstar.com (Links to an external site.). Instead of calculating the financial ratios, you can use the downloaded data file for analysis.
- Review and analyze the financial indicators and ratio on the following categories. Focus on how the financials change over time (for example, last two or three years) and the underlying business decisions and activities that cause the changes.
- Financials: Revenue, Net Income, Payout ratio %, Free cash flow, Working capital
- Key ratio -> Profitability: Gross margin, Net Margin %, Asset turnover, Reutrn on Assets, Financial leverage, Return on Equity
- Key ratio -> Growth: 3, 5, 10-year Revenue %, Operating Income %, Net Income %
- Key ratio -> Cash Flow: Free cash flow / Sales %, Free cash flow/Net Income
- Key ratio -> Financial health: Total Current Assets, Total asset, Long-term debt, Total stockholders’ Equity
- Liquidity/Financial Health: Current ratio, Quick ratio, Financial Leverage, D/E ratio
- Key ratio -> Efficiency Ratios: Receivables Turnover, Inventory Turnover, Fixed asset turnover, Asset turnover
- Review at least two major financial decision (investment, financing, dividend, or working capital management) by the company. Based on the above ratio analysis, explain
- Why the investment decisions above are necessary
- For example, introducing new profit to raise the profit margin and profit.
- or how those investment decision would improve the financial performance.
- For example, cost cutting decision would increase the net profit margin and improve the financial profile.
- Explain whether the change of financial ratios can explain the stock performance.
- For example, a decreasing Return on Equity could cause negative stock returns.)
- Why the investment decisions above are necessary
- Based on the above analysis, comment on the investment value of the stock. In particular, shall we invest in the stock?
Requirement for submission.
- Organize your data and analysis into a research paper. You need to copy the data into the word file and add your analysis and comment.
- The written paper is to be typed double–spaced, 1’ margins, Times New Roman and 12-point font, with correct spelling and grammar, proper citation, references, with a cover page and organized with headings.