{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Chapter15CompanyAnalysis - Company Company Analysis Chapter...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
Company Analysis Chapter 15 Charles P. Jones, Investments: Analysis and Management, Tenth Edition, John Wiley & Sons Prepared by G.D. Koppenhaver, Iowa State University 15-1
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Fundamental Analysis Last step in top-down approach is Last step in top down approach is company analysis Goal: estimate share’s intrinsic value Goal: estimate share s intrinsic value ¾ Constant growth version of dividend discount model g - k D P value Intrinsic 1 0 = = ¾ Value justified by fundamentals 15-2
Background image of page 2
Fundamental Analysis Earnings multiple could also be used P 0 =estimated EPS × justified P/E ratio Stock is under- (over-) valued if intrinsic value is larger (smaller) than current market price Focus on earnings and P/E ratio ¾ Dividends paid from earnings Cl l ti b t i d ¾ Close correlation between earnings and stock price changes 15-3
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Accounting Aspects of Earnings How is EPS derived and what does EPS represent? Financial statements provide majority of financial information about firms Analysis implies comparison over time or with other firms in the same industry Focus on how statements used not Focus on how statements used, not made 15-4
Background image of page 4
Basic Financial Statements Balance Sheet ¾ Items listed in order of liquidity or in order of payment ¾ Assets Cash vs. non-cash assets Non-cash assets may be worth more or less than carried on books Depreciation methods for fixed assets Inventory evaluation choices 15-5
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Basic Financial Statements Balance Sheet ¾ Liabilities Fixed claims against the firm ¾ Equity Residual Adjusts when the value of assets change Linked to Income Statement Picture at one point in time ¾ 15-6
Background image of page 6
Basic Financial Statements Income Statement EBT Sales or revenues - Product costs - Taxes Net Income Gross profit - Period Costs available to owners -Dividends EBIT - Interest Dividends Addition to Retained Earnings EBT EPS and DPS 15-7
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
The Financial Statements Earnings per share ¾ EPS =Net Inc./average number of shares outstanding ¾ Net Inc. before adjustments in accounting treatment or one-time events Certifying statements ¾ Auditors do not guarantee the accuracy of earnings but only that statements are fair financial representation 15-8
Background image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}