Investments Project Outline

Fundamental Analysis
I want the paper formatted with 12 pt Times New Roman font, double-spaced.
Outline of the Paper

1. Cover page
   a. Title of your paper, Class name, Your name, My name, date
2. Executive summary
   a. 1 page summary of your facts and findings used to give a brief guideline to the reader of the report
3. Introduction
   a. Give a brief overview of the firm you are analyzing such as their yearly sales, where they are headquartered, what their main products/services are, etc. This should be 2-3 paragraphs at most
4. Economic Analysis
   a. What are the current projections for growth this year in the United States looking at GDP? Europe? China? Emerging markets? Consider using the Fed Beige Book and other reports to assess this information.
5. Industry Analysis
   a. Based on your economic analysis, what types of industries will do well in the upcoming economy? Are they cyclical, countercyclical, growth, defensive, etc.
   b. Please give some backing of your opinion using sources such as economist opinions or other research published on the subject.
6. Company Analysis
   a. Based on your industry analysis, you then must choose a company in that industry that you think may be a good investment candidate. One way to start to sort this out is to look at the market leaders. Yahoo. Finance.Com will have some information on what the market share is of various companies in a particular country. It is probably reasonable to say the market leaders are there because they are good companies. It is also possible that a small startup company is a good bet and will take market share from the leaders.
   b. When stating that you think your company is a good candidate for analysis focus on the following:
   i. How much market share do they have? What kind of sales growth have they had versus the competitors? How do their ratios stack up against the competitors? What does the analyst community think about your company? What kind of forecasts have the analyst made? How do they make money? Is it sustainable?
   c. Management Discussion
   i. Who are the top people in the firm? CEO, CFO, CIO, COO etc? How long have they been there? Did they rise up through the company or where they brought in from the outside? What have they done in the past? Are they cost cutters, innovators, management experts, finance people, etc?
   ii. What has been written about them in the press? Any outstanding achievements in their company, industry, or personal lives that might point to their character or leadership potential? A good place to get articles is the Bloomberg Terminals.
   d. Customers
   i. Who do they sell to? Retail, wholesale, corporations, government? Is demand stable, growing, or declining by this customer group?
   e. Regulations
   i. Does the company/industry have heavy government regulation imposed or pending?
   f. Financial
   i. Ratios analysis
   ii. Financial forecast
   iii. You should look at 2-3 years of past data to look for trends in things like sales and expenses to make a pro forma financial statement for you forecast which you will use to create a DCF – Discounted Cash Flow valuation. Please look at the documents provided to get ideas of this part of the analysis.
   The conclusion of the paper should be your recommendations based on the highlights of the above analysis. A price range of say +- 5% would be better than a strict dollar amount.

Forecasting option

For this project you will use the stock you have chosen to perform a forecasting analysis on.
Download the sales data for each quarter for a 5 year period. 10 years would work better but we may find getting 10 years of quarterly economic data hard to come by.

1. For the same 5 year period you will need to download economic data from leading economic indicators on a quarterly basis.

Here are some indicators to look at:
The ten components of The Conference Board Leading Economic Index® for the U.S. include:
Average weekly hours, manufacturing
Average weekly initial claims for unemployment insurance
Manufacturers’ new orders, consumer goods and materials
ISM® Index of New Orders
Manufacturers' new orders, nondefense capital goods excluding aircraft orders
Building permits, new private housing units
Stock prices, 500 common stocks
Leading Credit Index™
Interest rate spread, 10-year Treasury bonds less federal funds
Average consumer expectations for business conditions

2. With all of this data entered into excel, you will perform a regression of each indicator against your sales for the company. Our intent is to find a leading indicator(s) that has/have a high correlation (i.e. + 90%) to the company’s sales. Once we identify the indicator we can construct the regression equation to forecast sales for the next quarter for your company.
3. We will then take the sales forecast and forecast the company’s income statement using the percent of sales method. From this we will end up with net income which we can use to find earnings per share. We can then take forecasted EPS and insert it into the P/E ratio to get a predicted stock price.
4. Using this predicted price, we can then compare the market price to it and decide if the stock is fairly priced, overpriced, or underpriced.

Sample Solution