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Day 46 ……4/3

Day 46 ……4/3. Typically, a rising GDP and lower interest rates offer what indication of the economy?. What’s it worth?. Market Value = what people are willing to pay Book Value = (stockholders equity), accounting pov Intangible Assets? brands, patents, human capital

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Day 46 ……4/3

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  1. Day 46……4/3 Typically, a rising GDP and lower interest rates offer what indication of the economy?

  2. What’s it worth? Market Value = what people are willing to pay Book Value = (stockholders equity), accounting pov Intangible Assets? brands, patents, human capital Also, hard assets can be distorted (acctg procedures)

  3. What’s it REALLY worth? Fundamental Analysis - the study of all aspects of a company in an effort to understand its intrinsic value. (actual, fair worth) the way it makes $$(model) products position in industry sales, earnings, etc Overvalued? Undervalued? (onsale)

  4. Start here…. Qualitative measures how does a company make $$$? product mix competition strategy brand

  5. Then… Quantitative comparisons ratios past performance prediction Finally… Estimate of Value Compare stock price

  6. No magic bullet. 1. overall picture of company 2. over time 3. industry comparison

  7. Know the Company (qualitative) business model product (appeal, new products) where does it do business who are the customers (demographics) who is running the company annual sale growth strategy what is special (brand, product, patent, way of doing business)

  8. Size up the competition (qualitative) • sector and industry • what influences them – technology, laws, tastes • competition (price, growth, etc) • barriers to entry • low- intense competition (dell) • high – competition unlikely (pharmaceuticals) Tomorrow - Quantitative

  9. A man has to get a fox, a chicken, and a sack of corn across a river. He has a rowboat, and it can only carry him and one other thing. If the fox and the chicken are left together, the fox will eat the chicken. If the chicken and the corn are left together, the chicken will eat the corn. How does the man do it? Day 47…..4/4

  10. In you own words, state: 1. the business model 2. product appeal 3. Where do they do business? 4. Who are the customers? 5. Executives background 6. Annual sales 7. What makes company special?

  11. Quantitative • Sales ABC -- 4 billion versus XYZ -- 2.5 billion (2013) which company is better? cost of goods? ABC – 5 billion versus XYZ – 1.75 billion (2012)

  12. EPS - earnings per share Net Income / # shares outstanding 2.279M / 1.270M = 1.79 Higher is better, but need to compare and look at other variables (profit margins, etc.) Trailing vs. Projected?

  13. Net Profit Margin (profitability) Net Income / Total Sales 2.279M / 19.065 = .12 (12%) 12 cents income for every dollar in sales

  14. Return on Equity (ROE) Net Income / Book Value High as compared to ROE’s or to others in industry, mean company is running efficiently

  15. Price – Earnings (most popular) – increase in stock value Price / EPS $60 / 3 = 20 investors are willing to pay $20 for every dollar of earnings The lower the #, the lower the expectation of performance The higher # means a higher return is expected in future

  16. Price-Earnings Growth PE / EPS 40/ 10% = 4 Lower the better. Paying less for each unit of growth.

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