Valuation of Stock
The stock valuation project calls for the choosing of a stock, and I have chosen Cisco Systems. This company is traded on the NASDAQ under the ticker symbol of CSCO. I wanted to choose a stock that is an important part of the business environment. I wanted a growth stock, and looked to technology, but I also wanted to pick something that was a bit under the radar. Cisco fits that bill because it does not sell to consumers, but mainly to other tech companies. In that sense, Cisco is a bellwether stock for the entire technology business.
General Description of the Economy
The general economy is in a state of downturn. The downturn began in 2007-2008 when the financial crisis emerged. This caused a credit crunch, and then job losses. Unemployment and uncertainty saw the reduction of the overall health of the economy. Since…… [Read More]
Scholastic Corporate (NASDAQ: SCHL) is an educational publishing firm based in the United States. In order to make an investment recommendation on this stock, a number of different techniques can be used to analyze its financial performance. These include ratio analysis, for which three ratios will be chosen, and trend analysis for the past three years. The stock is currently trading at $26.41, its lowest level since August of 2010, but substantially higher than its levels at the depths of the recession in early 2009. The company has a beta of 1.31, indicating that it is more volatile than the market in general. The three ratios that will be examined are the current ratio, which measures liquidity, the net margin, which measures profitability and the return on equity, which measures the ability of the firm to convert its equity into profit.
The current ratio for Scholastic is 2.27.…… [Read More]
The insights and expertise of Kathleen Collings-Lang in the video Stock Valuation are invaluable in gaining insights into the similarities and differences of how bonds and stocks are valued today, emerging trends in these fields, and the critical role of quantitative analysis in determining the value of equity investments. The valuation of stock and equity investments is more accurate when qualitative and quantitative factors are taken into account (Fielitz, Muller, 1985). Ms. Collings-Lang accentuates this point in her discussion of stock valuation techniques, indicating that the selection of a dividend discount rate, which can is often subjective, is integral to the dividend discount model being correctly used to value a given stock. She alludes to the fact that the selection of a dividend discount rate also must take into account he nuanced and highly specific factors impacting a business, seasonality being one of the most significant for capital-intensive…… [Read More]
The stock that I chose is PepsiCo. I was drinking a Pepsi when I was thinking about a stock to do, and it just seemed like a good idea. That is why I picked the stock, but PepsiCo (PEP on the NYSE) is a major blue chip stock so there is no reason why I shouldn't pick it. The current stock price of PepsiCo is $85.31
PepsiCo is in the food and beverage industry. They manufacture, bottle and distribute mostly soft drinks and snacks. According to the annual report, the company is split 51% food and 49% beverage and has the same split for U.S. revenue and non-U.S. revenue. Two-thirds of the company's business comes from the Americas. Frito-Lay is the major food company and Pepsi is the major beverage company. The company also owns Quaker Oats, which is the owner of Gatorade and Tropicana. This is considered…… [Read More]
The stock that I have chosen is Clorox (CLX), the bleach making company. I wanted to find a company that was about as classic a case of a no growth company as possible. Most of the high profile companies in the stock exchange are fast-growing companies, to the point where even those who have a flat domestic share are trying to grow internationally. I wanted to see if there was still a classic no growth company out there, and this was the first one I found.
Clorox is mostly a bleach company, but it has a few other brands that are also familiar to consumers. These include Brita, Burt's Bees, Glad, Pine Sol and Kingsford Charcoal. Most of these brands fit with the general corporate theme of slow-growing businesses in basic industries.
Clorox competes mostly in North America. The economy in the U.S. is the largest on the…… [Read More]
Firms, even in the same industry, can only be evaluated on the basis of their ratios when their business characteristics are relatively similar. This includes products, markets, responses to economic stimulus, cost of capital and a variety of other attributes. The further Citrus Glow is from its competitors on any key measure the less useful Dan's method becomes. Furthermore, Dan's assumptions regarding the firm's growth prospects are arbitrary, rather than based on accurate assessments of the firm's expected future performance.
4. Joe's variable growth rate approach takes the belief that investors only pay for the known cash flows, that is to say the dividends. In this case, the assumed dividend would begin at $1.50 per share. The terminal value is $8.83, giving the stock a value of $26.63. This sits above Lisa's number, and presumably somewhere below Dan's undisclosed number, since most of his totals are above this point.
5.…… [Read More]
Walk Down Wall Street
Stock Valuation from the Sixties through the Nineties
Malkiel notes that there were a number of speculative trends from the 1960s to 1990s, and that they all mended up in the same way. Every few years, the stock market has another bubble or speculative mania which soon crashes and levels off, such as overvalued food stocks in the 1980s or the Nifty Fifty blue chips in the 1970s, but in both cases the speculative phase ended and stocks returned to their normal values. By the 1990s, institutions accounted for more than 90% of the trading volume on the NYSE, and yet professional investors participated in several distinct speculative movements from the 1960s through the 1990s. In each case, professional institutions bid actively for stocks not because they felt such stocks were undervalued under the firm foundation principles, but because they anticipated that some greater fools would…… [Read More]
The valuation and method used to determine the Initial Public Offering (IPO) value of Facebook stock was based on numerous factors. First, it was a much-hyped IPO, with retail investors seeking to get in on the action that venture capitalists had already secured years prior through private investment. Everything connected in one way or another to Facebook was receiving attention, even Zynga, the one-hit wonder PC-game producer. Second, the company’s worth was measured by clicks and projected ad revenue as well as by the number of users of the company’s products. The company had stated a net income of $1 billion in 2011, up 65% year-over-year, indicating that it was steamrolling to profits. With 845 million monthly active users and 483 million daily active users, it was positioned as a great platform for advertsing. Its market cap, however, was a stagger $104 billion at the time of the…… [Read More]
Valuing Common Equity
Comparison of Lowes and The Home Depot
There are different methods that firms and investors can use to value the common equity that a corporation holds. The different methods all have strengths and weaknesses in different circumstances and it is important to understand these factors in any evaluation. For example, the company's future income stream will ultimately determine the company's fundamental value; however these calculations are not always what determines a firm's market price. Although there are many factors that determine the market price, the company's net present value (NPV) of future revenue streams can be useful to both investors and internal executives relative to managerial accounting. A company's NPV can be used to compare different direct investment opportunities as well as calculating an average cost of capital to serve as an investment baseline; whereas indirect valuation are more subject and often lie on whether investors believe…… [Read More]
Identification of Subject Property
The subject site is an office property in Oakville, Ontario. It can be sold either in parts or as whole, and this report will consider the whole. The size of the whole building is 4016 square feet. The property is located on the service road adjacent to the Queen Elizabeth Way (QEW), a major highway in the region that links Toronto with the cities of Hamilton and Buffalo. The property can be subdivided into multiple units, at least three. There is a current tenant occupying 839 square feet and room for two more tenants or one primary occupant.
The market for this type of property is relatively soft at present. The prevailing economic conditions are for sluggish growth, with some observers predicting a protracted housing correction and "muted business investment." The recent federal government budget has more cuts than spending, and the…… [Read More]
Having wealth is one thing; managing hat wealth in an effective manner such that it produces more wealth at an efficient rate is quite another. As a great deal of wealth ends up in the stock market -- where wealth can be quickly created and even more quickly eroded -- understanding how to conduct a comparison of stocks is essential for proper portfolio management. There are many different considerations that should be taken into account when selecting stocks, but one simple and straightforward method of analysis is to simply compare the past performance of stocks that are being considered. Both the price changes and the volatility of past stocks performance can be an indicator of the risk and rewards associated with a given stock, especially in comparison with other potential investments, and this can lead to a better decision regarding which investment to select for the…… [Read More]
There are a number of different factors that contribute to a stock's valuation in the market compared with the financial statements. One fundamental difference between the two is that the book value reflects past performance while the market reflects future performance. Book value of the company's equity is determined by the past profit performance of the stock and the amount of debt that the company has. The market value reflects the investor's expectations of the future cash flows that will accrue from owning one share of the company's stock (No author, 2011).
Valuing a firm's equity can be done using a number of techniques, each relying on different assumptions. The first of these is the Gordon growth model (or dividend discount model). This model assumes that stocks are valued based on their intrinsic value alone -- that the value of a company's stock is based only on the known…… [Read More]
Valuation and Financial Statements
The question of shareholder interest as it pertains to a takeover bid is dependent on a variety of factors, not the least of which is the valuation of the company as determined by the board of directors and executive management. While current stock price plays a relevant role, valuation depends on analysis conducted in key areas including but not limited to: earnings multiple times EBITDA, price to book ratio, forward looking earnings guidance, and perhaps most crucial enterprise value. The current scenario of ABC Company pursuing the acquisition of XYZ Company for $35.00 a share, a $10.00 premium over the current $25.00 stock price, allows for an explication of these valuation techniques.
XYZ management believes that the $35.00 offer price is undervaluing the company and as such is not in the shareholder's interest. In identifying the rationale for this position a logical place to…… [Read More]
Question 1- Valuation - Valuation Using Comparable information- Valuation is a process of estimating worth of an asset. However, when valuing a company or organization there is no "one" correct way to accomplish the task. Each organization may have a different way of reporting historical information, and event financial statements prepared with GAAP show assets based on a more historical, rather than current, paradigm. Generally speaking, though, the valuation of financial assets is done using one of more of three models:
Absolute values -- These models focus on the present value of an asset's expected future cash flows -- using multiperiod models like discounted cash flow or single-period models like the Gordon model. Absolute values take into account objective issues and are quantitatively based, but are valuable as only a partial picture into the actual value of the asset and may not be transferable from one industry to the…… [Read More]
It is expected that the bond will mirror the performance of the S & P. 500. ("Transaction History," 2010)
November 24, 2010
On November 24th several more new purchases would take place to include: General Motors, erkshire Hathaway, the Fidelity Immediate Government Fund and the Strategic Advisors Income Fund.
General Motors was selected, because it could help to provide the portfolio with above average growth. The results were that that stock would see an increase of 1.4%. ("Transaction History," 2010)
erkshire Hathaway was purchased to provide the portfolio with stability and diversification. This investment is expected to outperform the major market averages. The results were up .96%.( "Transaction History," 2010)
The Fidelity Intermediate Government Fund was selected because of their focus on medium term Treasury investments. This is expected to underperform the market averages. The results were that the position declined by 2.55%. ("Transaction History," 2010)
The…… [Read More]
In general, P/E valuation is a common and reliable method for appraising a company's value, but, as with any method, caution must be exercised.
Discounted cash flow
The discounted-cash-flow method is arguably the most complex valuation model discussed in this paper, but it is often considered reliable because it considers a company's post-sale prospects (Calculating Discounted 2005). In the case of the previously discussed over-valued dot.com, it is easy to see where a potential buyer would eventually develop a cash-flow problem. The company is barely profitable, and it's going to take $5 million to purchase the company, likely creating some debt to be serviced. Perhaps a company with multiple business units would be capable of servicing that debt through the performance of the other units, but clearly the business being acquired could not service such debt through its own cash flow.
The discounted-cash-flow method works well because one of the…… [Read More]
One of the most significant factors in the decision to invest in ICICI Bank is to determine the affects of recent capital expenditure and the anticipated return for these investments. Entry into microfinancing represents a considerable amount to risk, due to the financial instability of the target market. The following chart highlights the most significant changes affecting the financial health of ICICI bank that result from expenditures associated with entry into the rural finance venture. It compares key indicators and explains the effects of ICICI's most recent changes to their banking strategy.
Income Statement for years 2003-2006 (in millions USD)
Cost of evenue
Balance Sheet for years 2003-2006 (in millions USD)
Cash Flow for years 2003-2006 (in millions USD)
Net Cash Flows Investing
Net Cash Flows Financing
Net Cash Flow
Data Source: Nasdaq.com (2007).
The income…… [Read More]
Executive Stock Option Plans
"If the company does not do better than its competitors, but the stock market goes up, executives do very well from their stock options. This makes no sense." Discuss viewpoint. Can you think of alternatives to the usual executive option plan that take the viewpoint into account?
Executive stock options are performance-based incentive plans that became popular in the 1950s and 1960s. They declined due to the stock market crash of the 1970s, but returned aggressively returned in the 1990s (Kole, 1997). Today, most companies grant stock options to their top officers as part of executive compensation, along with salary and bonuses. Options that are awarded as part of a compensation package can be very valuable to executives when stocks are performing well. The challenge comes in when stock value is realized for executives even when a company is not faring well at all. This is…… [Read More]
determinants of stock prices, to explain why stock prices fluctuate. There are a number of models that seek to explain stock valuation, including the dividend growth model and the efficient market hypothesis. For many investors, capital gains are the key to a company's value, and EMH would thus apply. Stock prices reflect the aggregate sentiment about the future prospects of a company. These sentiments constantly change, based on new information being released and applied to what is already known about the company, its industry, its competitors and the economy at large. The constant stock price adjustments reflect this collective analysis of all information regarding a stock and the interpretation of its future prospects.
A stock is a share in ownership of a company. In theory, a share entitles the holder to a proportional share of future income. There are different schools of thought as to what exactly this entails…… [Read More]
00. ("Nue Core," 2010) Arcelor Mittal has trailing PE ratio of 23.28 and a forward PE ratio of 7.09. The current ratio is 1.35 and the put call ratio is .55. The price dividend ratio is 45.74, while the beta is 2.70. ("Arcelor Mittal," 2010)
Upon doing a side by side comparison, Arcelor Mittal is the strongest company out of three. This is because their PE ratios remained more stable over the past year and the reading of 7.09 on the forward PE ratio, is an attractive long-term valuation. The high put call ratio indicates that investors have become somewhat pessimistic in the stock. The price dividend ratio is the only drawback, where historically this number should be in the 14 to 17 range. However, given the volatile nature of the steel industry, the fact that they are continuing to pay dividends after a severe recession is a sign of…… [Read More]
When it comes to the valuation of equities, there are three different methods that are commonly used. These three methods are the dividends valuation method, the free cash-flow method and the market-based method. As one might expect, there are pros and cons to each approach. As such, a proper compare and contrast of what is better in what ways and what is potentially inferior in other ways can and should be ventured into. Of course, there would be advantages and disadvantages to all three methods and this would thus lead to one method being favored in a given situation, for whatever reason. While the perceived outcomes and such would be different for each method, the proper method of valuation should be chosen based on the situation and the perspective/needs of the company or person doing the evaluating.
When it comes to the free cash flow method, this…… [Read More]
The FCF-based valuation model is based on the following formula:
EBIT (1-Tax Rate) + Depreciation & Amortization - Change in Net orking Capital - Capital Expenditure
is the free cash flow each year, C0 is the original cash outlay, and r is the discount rate. The free cash flows in this type of calculation are only those cash flows that are incremental to the investment decision. Thus, they do not include such non-cash items as depreciation or amortization expense, and they do not include either sunk costs or non-incremental flows like overhead allocations. The r is the discount rate, and the firm can select its discount rate from a number of different options. The most common, and arguably logical, is the firm's weighted average cost of capital. This reflects the firm's cost of equity, its cost of debt and its capital structure, with allowances for preferred shares…… [Read More]
If one particular company has plenty of liquid assets, which therefore assures its progression in future business ventures, then the company has good potential for investing. However, if the company seems to have more current liabilities than assets and capitol, then the investor should definitely look elsewhere.
There are several ways which investors should judge companies in terms of potential investments. One is to judge a company based on their earnings per share, which is calculated through the earnings of the company in the last four quarters. Revenue-Based Evaluations compares companies based on revenues as related to company costs or long-term debt. Investors should also look at a company's cash-flow, or the amount of capitol which actually passes through a company each quarter after that company withdraws money for the cost of maintaining business. Another way is to judge based on the equity of a company, which is judging the…… [Read More]
I vs. MI Valuation Methods
The process of capital budgeting in corporations involves selecting projects that add value to the organization. Capital budgeting can involve nearly everything like buying a new truck, replacing old machinery, and acquiring some land. In most cases, businesses, especially corporations, are required to conduct these projects in order to improve profitability and enhance the wealth of shareholders. The process of undertaking a capital budgeting decision requires the company to first determine whether the project will be profitable. The determination of the profitability of a project is accomplished through the use of several valuation methods like the Internal ate of eturn, Net Value Present, and Modified Internal ate of eturn. These approaches usually produce different results though the ideal capital budgeting solution should result in the indication of the same decision by the three metrics. Organizations tend to place more emphasis on one valuation method than…… [Read More]
Black & Decker
Since the merger with Stanley, Black and Decker has seen a steady increase in its revenues, gross profit and net income. The different elements of the new company are still being integrated, underperforming divisions are being shed, and synergies between the different components are still being developed. As the company continues to make internal improvements, it can expect that it will continue to grow both its top and bottom lines. It is reasonable to expect that over the next 2-3 years, ongoing internal improvements will help to improve margins, all other factors being equal. The post-merger improvements in the percentage of SGA expenses to revenue should continue in the short-run, albeit at a slower pace. Likewise, internal factors are likely to be responsible for at least a modest growth in income, as marketing synergies in particular emerge.
External factors are also critical to the forecast. The…… [Read More]
The company is being set up as that of a retail company, and this will require the demands of a large amount of stock. Most of the stock needs to be bought and then sold at the earliest opportunity which is available. It could also be stated that it may also be possible to get suppliers who will supply at regular fixed intervals of duration of a week or so. This will help as regards to keeping the stock within the limits of the store or at a nearby stock point. Under such cases or circumstances, it should be viewed that the stocks which are been seen as coming in first are being sold first. The importance of last stocks in, first stocks out comes only when stocks are being held for a considerably longer period of time. In this case, it could be said that even the…… [Read More]
Real options valuation: KLM ailines flight options
The object of this pape is to delive a eal option valuation of an option on an ai ticket fom KLM Ailines. The pape consists of seveal pats: (i) a file explaining the poblem, the modeling choices and the solutions (ii) a table with calculations and; (iii) the conclusion.
The value of an options contact elies on a vaiety of diffeent vaiables. In addition to the value of the undelying asset itself, options ae extemely complex to value. Thee ae many picing models in cuent use, though all basically incopoate the concepts of moneyness, ational picing, put-call paity, option-time value.
Moneyness is a measue of the degee to which a deivative is likely to have positive monetay value at its expiation.
Rational picing is the assumption in economics that asset pices will eflect the abitage-fee pice of the asset as any…… [Read More]
41 in the next three years. The current price for al-Mart implies strong growth prospects. The company does have a sound strategy to retain its new customers and refocus growth efforts on less-saturated markets overseas.
In short, while there can be little doubt as to al-Mart's operational excellence, it is not necessarily a great investment. Growth has in recent years been of the slow and steady variety. The company's present valuation may be symptomatic of its status as a safe haven for investors during tough economic times. This means that the growth implied by its current share price may not be justified. Therefore, while al-Mart is a great company to own, it may not be the best investment at its current price and with the market beginning to show signs of recovery. The 0.20 beta and historic low volatility mean that al-Mart shareholders will not reap the benefits of market…… [Read More]
That was the year that significant changes were made in the Securities Act and the rules for bringing class action lawsuits were adjusted and modified. Because of those changes, it became more important from a litigation standpoint to ensure that conservatism was used in accounting valuation. Because there are empirical differences between the contracting and litigation perspectives, there have been many discussions regarding them in the past and that will likely continue well into the future. Each accounting firm must do what it feels is in the best interest of both itself and its clients, but the avoidance of lawsuits is a highly significant issue to consider when a company is planning to focus on a particular accountancy option.
C. Income Tax Perspective
Because income taxes are so closely tied to earnings, it only stands to reason that there would be an accounting valuation issue as it relates to conservatism…… [Read More]
022 million was registered in 1998 and the lowest of $308.670 million was registered in 2001
The operating expenses fluctuated between the high value of $24.745 million in 2000 and the low value of $15.737 million in 1998
The operating profit also fluctuated between $21.250 million in 1997 to a negative 17.591 million in 2000
The net income followed a constant descendant trend, decreasing from $12.368 million in 1997 to -$26.393 in 2001 (Keystone Workbook, Historical Common Size Income Statements)
elative to financial ratios, the following must be considered:
All ratios of operational analysis are larger than the industry averages, meaning that the company operates at high levels of quality and performance
With the exception of payable turnover and cash conversion cycle, all resource management ratios are superior to the industry averages, meaning that Keystone is fairly able to use its resources and transform them into money
Profitability ratios are…… [Read More]
Valuation, risk and return are closely linked, from different perspectives. Primarily, risk determines, to some degree, the level of returns, while both need to be seriously considered when conduction a valuation. In many occasions, the analysts work with information from the present, creating forecasts about risk and return that allows them to give, with a reasonable probability, expectations about future events.
This paper aims to look into more details at aspects related to valuation, risk and return. It will look, in the beginning, at different valuation techniques, detailing each of them and presenting their advantages and disadvantages. It will then focus on the analysis of risk and return, as a fundamental component of the valuation process. The paper will conclude with an overview of the methods and techniques described and ideas on best practices.
Valuation is the process of putting value on something, of analyzing what…… [Read More]
eal Options Valuation
Market investors often carry out their research in a sell side or buy side method. Sell side carry out their investment research to enable them satisfy buy side customers. They carry out this research to generate business or reach the goal of generating transactions. The buy side follows the prospective of banking customers as away of attracting new customers and a service to past customers. Sell side firms sell IPO's and services to the buy side companies.
Buy side and sell side
Buy side reports produced in house consumption are used by colleagues to the analyst. These colleagues can be corporate development executives and development and portfolio managers. Sell-side reports done by firm analysts are vastly distributed than the buy side reports. Sell side reports should be clear because of their wide distribution, while by side reports should be simple and brief because company's management uses them.…… [Read More]
Marketing Valuation of Special Kellog's Cereal
Marketing valuation Kellogg's Special K. cereals
Kellogg's Foods: 3
Marketing mix: 3
Product Differentiation: 5
Triple bottom line Strategy: 6
Financial, Social, and Environmental Factors: 7
The business case of Kellogg's Special K. cereals is analyzed to assess the effectiveness of marketing mix, key features of the business strategy, and growth factors. The history of Kellogg's Foods is briefly described along with the analysis of marketing mix. Later section provides a brief about the product differentiation strategy of the business. The recommendations for overall business are followed by the triple bottom line strategy. Finally conclusion is presented as a summary of the findings.
The company started its operation in 1906 and expanded its operations in domestic market. The first international opening is remarked as its Canada operations in 1914. The innovative development in 1915 was introduced…… [Read More]
Apple Inc. Stock
In 2017, AAPL has performed quite well. It started the year off at $115 and today is selling for $170. 2017 has been a great year for stocks, with the election of President Trump seeming to have a lot to do with the rise in equities across the board, as the market has expected the President to introduce tax cuts that would be good for businesses like Apple. I was attracted specifically to Apple because I am an Apple user, enjoy the products, have many friends who enjoy the products and think it is a great brand to be a part of. I think that it will continue to perform well thanks to the creative forces within the company and the good leadership at the top of the company.
I bought AAPL at $156 and sold at $174 for an 11.5% gain. I purchased the stock because…… [Read More]
UnitedHealth Group Stock
This report will provide insight into the UnitedHealth Group Stock from an investor's perspective. The report will show a financial analysis included with an overview of the company's current health standing. The paper will also provide a summary of the company and their products and services. The key to any intelligent investing strategy lies in the investor knowing what a stock is really worth and also if it is safe to buy, sell or hold. Therefore, since this report is from an investor's perspective, the company's stock and industry will be reviewed so as to present a big picture of where United Health is today and where they want to go in the future.
Over the five past years the UnitedHealth Group stock has been making great progress as analysts consistently consider the group a strong buy option. As can be seen from the two…… [Read More]
Such events are usually difficult, slow, and distasteful processes. Figuring out whether bond obligations are likely to be fulfilled by issuers is best left to bond investment specialists.
Securities pricing is the bond market is complex and different from the stock market. hile a firm usually has only one kind of common stock, it could have dozens or even hundreds of different outstanding bond obligations. Setting current bond prices is complex. Few individual investors have the required skill, knowledge, information, and experience to make such assessments.
For individual investors it is much more straightforward simply to hold bonds through a bond fund. Once a bond fund establishes its "style" for the type, maturity, and quality of bonds it will hold, it selects and purchases bonds with an eye toward maintaining that style. Maintaining targeted maturity is relatively straightforward. Determining investment quality is less straightforward, but bond mutual funds have analysts…… [Read More]
Facebook IPO Valuation Method
In accordance to the Securities Exchange Commission (SEC) egistration Statement Form S-1, Facebook's Initial Public Offering (IPO) method of valuation encompassed considering several objective and subjective factors to ascertain their best estimate of the fair value of their Class B common stock. The factors included latest private stock sale transactions, historical financial results and projected trends, and projections for Facebook's future financial performance. There was also the factor of the performance and market position in relation to competitors and identical publicly traded corporations. Another factor was the economic and competitive setting, taking into account the industry in which Facebook operates and independent third-party valuations completed at the end of every financial quarter (Securities Exchange Commission, 2012).
The valuations of the Facebook IPO took into consideration the aforementioned factors and also employed a combination of financial and market-based methodologies to ascertain the firm's business enterprise…… [Read More]
By opening stock options to middle management and employees, it was assumed that better employee performance would be incentivized. As company stock prices go up, it creates a greater spread between the option price when it was granted to the employee and the hypothetical sale price at the end of the vesting period. Consistently better performance over a longer period of time would yield greater reward when the option is exercised. However, as Hall and Murphy again point out, "even if employees can increase the value of the firm, their share of that gain through their option holdings is very small. Combining this enormous free-rider problem with the risk imposed on employees through stock-based pay, it seems obvious that cash-based incentive plans based on objective or subjective performance measures can provide stronger and more efficient pay-performance incentives."
Despite many early statements in the life of the practice that employee stock…… [Read More]
The first component is as follows: Net Margin = Net Income/Sales. How much profit Abbott laboratories makes for very $1.00 it generates in revenue, and the higher a company's profit margin the better. The second component is as follows: Asset Turnover = Sales/Total Assets. The amount of sales generated for every dollar's worth of assets. This measures Abbott's efficiency at using assets, and again, the higher the number the better. The final factor of the Du Pont analysis is as follows: Leverage Factor = Total Assets/Shareholder's Equity. The higher the number, the more debt the company has. Abbott's Du Pont analysis is computed using the following equation:
In this case, for the end of 2006, Abbott Laboratories reported a net income of $717 million dollars, sales of $22,476 million, total assets for 2006 of $36, 178 million, and equity of $14,054 for 2006. Placing these figures into the equation above…… [Read More]
Multiples Valuation and Estimation of Financial Distress of William Companies
The paper uses the market approach to calculate the William Companies multiples-based valuation of shares. The direct competitors of Williams Companies are:
The paper uses 200 financial statements of Williams Companies and its competitors to carry out the multiple valuation of shares.
The next step is to determine the correct P/E (Price Earning) Ratio and the formula to calculate the P/E ratio is as follows:
P/E = "Current Stock Price / (Net Profit / Weighted average number of shares)"
The P/E ratio of Williams Companies peer companies is as follows:
Number of Shares
4, 324 M
3.774B…… [Read More]
There are discrepancies encountered in conducting the valuation and risk of a private company. There arises these factors that if investigated can impact the process accordingly. The first research question that I suggest is investigating if the tax risk and equity market value exhibit a concave association, which is consistent with the optimal tax risk level from a valuation of equity standpoint. The second topic that can be researched upon is the changes facing the risk and value valuation service area for businesses and how they impact the practice. Finally, a study on how the Merger and Acquisitions revised standards are impacting business deals.
Chandra, U., & o, B.T. (2008). The role of revenue in firm valuation. Accounting Horizons,
22(2), 199-222. etrieved from http://search.proquest.com/docview/208923683?accountid=35812
Darrough, M., & Ye, J. (2007). Valuation of loss firms in a knowledge-based economy. eview of Accounting Studies, 12(1), 61-93. doi: http://dx.doi.org/10.1007/s11142-006-9022-z
Bernier, G.,…… [Read More]
Security Valuation eport
Select Harvests Competitive Analysis
Select Harvests Limited is a leader in the almond industries not only in Australia, but also globally. In addition, for a number of years now, the company has operated a global competitive almond operation, bringing about strong revenues and proceeds to the stakeholders. Global competitiveness and additional prospects to leverage systematization and scale invigorated the company to additionally increase its acreage (Bird, 2015). The Select Harvests faces great competition from the industry, including numerous Almond Manufacturers that are yet to be listed in the stock exchange, for instance, Nut Producers Limited, Almond Co Limited, and also Olam International. Select Harvests has a competitive edge in the industry. For starters, approximately 50% of the revenue generated by the company emanates from the management fees of third parties, in addition to the capital financed in the past three decades or so, in research and development,…… [Read More]
Stock Valuation Questions
The market price for a stock or a bond may be influenced by both positive and negative risks. Using the example of Apple it is possible to consider two potential risks.
Apple Inc. is well-known for its aggressive defense of its patents; the best known cases are between Apple and Samsung with cases in more than 50 cases across multiple countries at one point in 2012 (Mueller, 2012). Apple and Samsung both had victories and defeats which were aggressively fought. These battles show how important development and ownership of a patient can be, with firms seeking to protect their intellectual property. A potential threat may emerge if Apple faced a claim of credible claim of patent breach from another major supplier for a core product, where stockholders may fear that the firm may be liable for a potentially large settle and/or withdraw the offending products…… [Read More]
LinkedIn Corporation is the "biggest professional-networking website" (Kucera & Frier, 2012). Launched on May 5, 2003 (Linkedin Corporation, 2012), and going public on the New York Stock Exchange in May, 2011 (Kucera & Frier, 2012), LinkedIn's stock more than doubled in value since going public, with stock valuation at $117.30 at close of trading on May 4, 2012 (Kucera & Frier, 2012), and LinkedIn increased its membership from 150 million to 161 million during the 4th quarter of 2011 (Kucera & Frier, 2012). Clearly, LinkedIn is a success story on several levels. Nevertheless, LinkedIn must deal with external and internal challenges, as do all corporations. A significant external factor/challenge to LinkedIn is posed by huge social networking sites, while a notable internal factor/challenge is presented by the lack of income from most of LinkedIn's users. These factors, along with other external and internal challenges, mean that LinkedIn cannot be…… [Read More]
Finance-dominated proponents also maintain that boom economic periods generate a more varied divergence of valuations that fuel merger activity (Medlen 2007). In this regard, Medlen concludes that, "Taken collectively, these understandings may explain some of the merger activity in booms, but they involve certain asymmetries that undercut their explanatory power. High stock valuations allow stock to be utilized as currency and collateral for takeovers; yet stock booms also make targets expensive" (p. 202). Moreover, despite the commonly held perception that mergers are a "quick and dirty" way to grow a business and achieve organizational goals, there remains a lack of convincing empirical evidence in support of this perception (Medlen 2007). As Medlen points out, an "anomalous fact about mergers concerns the lack of evidence that mergers are profitable. This fact begs the question: why then are mergers carried out with such frequency and with such large levels of capitalization?" (p.…… [Read More]
Fortunately for this sector the main opportunities for ships are in fulfilling existing contracts and the delivery of two Virginia-class submarines in the 2012 timeframe which are on schedule for delivery. As post-Katrina efforts to get production back on schedule continue it's believed the company can generate 8% margin in this specific sector going into FY 2007.
In summary, the table Analysis of Key Business Segments shows the success the company has had in distributing revenue over more segments, thereby alleviating risk while being able to position itself to take advantage of greater market opportunities in the process. The growth Mission Systems and Space technology, while much of the product development is confidential, show strong revenue and income growth which will continue given budgeting for space-based monitoring and defense systems.
Analysis of Key Business Segments
evenues 12/31/2005 (%) 12/31/2004 (%) 12/31/2003 (%) 12/31/2002 (%) 12/31/2001 (%) Electronic Systems 6,042,000 20%…… [Read More]
Firms may be successful by satisfying customer needs, but their ultimate accountability for financial performance is to the owners of the firm. Actions undertaken by quoted firm will usually have the direct, or indirect, aim of generating revenues and profits for the firm, and therefore the owners (Tarraf, 2012). When investors assess a potential investment they will look at the financial performance of a firm, assessing the past performance, with consideration of the way current and expected strategies will impact on the organizations performance, in the context of the expected macro-environmental conditions (Bodie, Kane, & Marcus, 2014). The investors will assess the share price of the firm, being more likely to make a purchase if they believe the value of the share is likely to increase with a significant amount of the assessment based on assessments of past performance (Hens & Rieger, 2016; Nellis & Parker, 2006). This…… [Read More]
Credit isk Management
Banks are an important part of the economy of any nation. Traditionally, the banks operate as financial intermediaries serving to satisfy the demand of people in need of various forms of financing. Through this, banks enable people to purchase home and businesses to expand. These financial institutions therefore facilitate investment and spending that are responsible for fueling the growth of the economy. In spite of their vital role in the economy, they are nevertheless prone to failure and just like other types of businesses, they also go bankrupt. Unfortunately, the failure of banks can have many and significant implications than any other type of business. As witnessed during the great depression, and in recent times following the global economic crisis and recession, the stability or lack of it in the banking system could trigger economic epidemics that would impact millions of people. With respect to this, it…… [Read More]
Defining the term "good company" on the terms of it recently experiencing rapid growth may be premature in realizing its worth as an investment. apid growth is a tricky idea and may lead many investors down the wrong path if they are unaware of the basics of stock valuation and determining what is right, prudent and wise. Although rapid growth may be an indicator of in fact a very good company to invest in, this criteria alone does not serve the successful investor in all cases.
Value is what is most important in this equation, as the risks involved in the market are unforgiving in those who ignore this idea in its entirety. Hough (2011) agreed with this idea when he wrote "esearchers have long studied the relationship between "value" and "growth" stocks. The difference mostly has to do with price. Value stocks are cheap relative to fundamental…… [Read More]
financial management methods, concepts and techniques are explained, their uses are analyzed and explained in detail. This paper also highlights the importance of these methods in the financial management and financial manager's decision making process. The case of Suarez Manufacturing is used to further explain the use of these methods.
Financial management is all about managing the finance of the company by making various investing, financing (debt financing or equity financing) or distributing (Dividend) decisions. The finance managers of a company are constantly involved in making various financial calculations so as to come up to those fundamental financial management decisions. (Correia et al., 2007)
Financing the projects of the company can be done by debt financing, equity financing or a combination of both types of finances. Debt and Equity finance can be obtained in many ways and the valuation of both debt and equity market values of the company can…… [Read More]
Cellular service was launched in UK in 1985. Cantel and affiliates of Mobility UK were licenced to operate at 800 MHz. Personal Communications Services (PCS) operating at 1.8 GHz was licenced in UK in December 1995 with two new players, Clearnet and Microcell each receiving 30 MHz of spectrum. Mobility UK affiliates and Cantel each received 10 MHz of new spectrum. PCS service was launched in late 1997. Today, a wide variety of national and regional licenced wireless carriers, along with numerous resale partners, provide wireless voice and data services covering more than 99 per cent of the UK population:
Petro UK Mobility
7-Eleven Speak Out Wireless
NMI…… [Read More]
ehavioral Finance and Human Interaction a Study of the Decision-Making
Processes Impacting Financial Markets
Understanding the Stock Market
Contrasting Financial Theories
Flaws of the Efficient Market Hypothesis
Financial ubbles and Chaos
The stock market's dominant theory, the efficient market hypothesis (EMH) has been greatly criticized recently for its failure to account for human errors, heuristic bias, use of misinformation, psychological tendencies, in determining future expected performance and obtainable profits.
Existing evidence indicates that past confidence in the EMH may have been misdirected, as the theory's models do not show a thorough understanding of trading operations in a realistic light.
Researchers have suggested that a variety of anomalies and inconsistent historical results demand that traditional financial theories, namely the EMH, be reconstructed to include human interaction as a key decision-making process that directly affects the performance of financial markets.
This research paper aims to determine whether or not there is a…… [Read More]
Selecting Stocks for Investment Purposes
The selection of stocks for investment purposes requires conducting analysis in order to determine the most profitable stocks. There are two most common schools of thought that are utilized in conducting analysis for investment purposes are fundamental analysis and technical analysis. While some investors utilize fundamental analysis, others prefer to utilize technical analysis and others conduct both fundamental analysis and technical analysis. For instance, Warren Buffet conducts fundamental analysis whereas George Soros utilizes technical analysis for investment decisions (Chauhan, 2013). Each of these renowned investors are successful in their investments through the use of the different analysis. The use of the different methods for selecting stocks for investment purposes is attributable to the unique attributes associated with each of these analysis procedures.
Fundamental analysis is a stock valuation technique that utilizes economic and financial evaluation to forecast the movement of stock prices (Badami, n.d.). When…… [Read More]
isk Analysis Financial Markets Main Techniques isk Analysis
isk analysis in the financial markets
This essay mainly intends to outline and explain the objective of risk analysis in the financial market and the main techniques used in risk analysis. In a bid to answer this question the study will first of all include a summation of the types of risks that are found in the financial markets. The financial market here has been classified into three groups that are; the stock market where company stock and shares are traded, the bond market where the Australian government usually sell its' treasury bills and bonds and lastly the international financial market.
Different risk analysis technique will spelt out in the two markets and then the objectives of risk analysis will then be mentioned before the essay concludes.
Types of risk in the financial markets
In his studies Jensen (2009) noted that there…… [Read More]
Capital gains and dividend taxes were both initiated in the early 1970's, by the Democratic Party. efore dividend taxes were enforced, the government made its money through higher aftertax yields, The dividend tax was originally supposed to be a progressive measure, so that the wealthiest paid correspondingly more than the poorest because they had benefited more. At this time, only the wealthy invested in stocks. This is no longer true. Most middle-class people today are investors in the market and they do not have the expensive accountants hired by the rich to shield their investments from tax.
Investing in the stock market has become far more widespread over the last two decades, as 84 million people - representing nearly half of all American households - owning stock. Tax-deferred investment tools such as 401(k) plans and individual retirement accounts (IRAs) have placed millions of Americans who make $60,000 or…… [Read More]
One set of concepts from each area was utilized to explain how the situation at Grand Bois may have come about. The end goal of the authors was to "provide business practitioners, ethics teachers, and readers interested in corporate conduct with insights useful in understanding why managers may act the way they do."
It could be argued, according to Hamilton and Berken (2005), that Exxon managers had made a sound business judgment, based on facts that were not known, at the time. The industry still contends that the majority of exploration and production waste contains no harmful compounds, and that for this reason the disposal techniques that are used at the Grand Bois facility were not only cost effective, but also environmentally safe.
Just because the exemption of this waste for hazardous materials was brought about by political lobbying does not mean that it is not scientifically or justified.
Oftentimes,…… [Read More]
Coca Cola -- External Analysis
An external analysis of Coca-Cola (NAICS # 312111 -- Soft Drink Manufacturing) requires scrutiny of the specific industry environment with Porter's 5-Forces model and examination of the larger business environment through a PEST analysis. In his interview on YouTube, Porter speaks of the five factors of Competitive Rivalry, Threat of New Entrants, Threat of Substitute Products, Bargaining Power of Suppliers, and Bargaining Power of Buyers. He also discusses the underlying forces for each factor, examining the Airline Industry, in which all five factors are strong, and the Soft Drink Manufacturing Industry, in which all five factors are "benign," essentially making the Soft Drink Industry "a license to print money" (Harvard Business Publishing, 2008). Porter stresses the importance and flexibility of his five forces, which keeps an organization focused on "underlying fundamentals" so the organization's leadership is not tricked or trapped by the latest trend or…… [Read More]
Much of what passes for unassailable historical truth turns out to rest upon shaky assumptions. However all aspects of investing are not so grim it is important to have your wits about you and do proper research.
Langstaff (1999) expressed how finance and investments have never been higher. He went further to report two more avenues for growing wealth and broadening investments. The internet represents an unprecedented opportunity for personal wealth creation, and the rules of wealth creation have been, and will continue to change by the new economy. As a result, books that do well address issues of, online trading, day trading, Internet stock valuations, or other subject specific content.
The three principles to use in homeownership/real estate to build wealth are being patient, borrow money cheaply, and build a success team (Johnson, 2005).
Futrelle, D. (2004, September). Build ealth in Any Market. Money, Vol. 33(Issue 9),…… [Read More]
According to Pilarski (2007), "the financial situation of the airline industry, especially in the U.S.A., has been between disaster and catastrophe," (p. 3). Financial wizards like Warren Buffet have made "bombastic pronouncements" related to the economic illnesses of the airline industry (9). Dynamic entrepreneur ichard Branson, himself seduced by the desire to own an airline, has likewise stated, "How do you become a millionaire? Start as a billionaire, and then buy an airline," (cited in "In-Depth Drilldown Of The Airline Industry - Part 1, 2012). Airline companies operate with razor-thin profit margins, if any at all. Moreover, the situation was bad enough befofre but has grown worse since September 11. "Since 9/11, we've seen tremendous changes surrounding the airline industry: security, regulations, and operational costs. Overall, these variables have had tremendous, and far-bearing, negative impacts on the industry," ("In-Depth Drilldown Of The Airline Industry - Part 1," 2012).…… [Read More]
. The mobile business market has seen significant of uptake of 2E (mobile sales-force and field service) solutions and Microsoft has the chance to develop its offerings around its acquisitions, adding mobile functionality. Microsoft partners with many application vendors across the board and moving too heavily into the application space would incense many. However, there is viability in developing a mid-market mobile application proposition, given the unconsolidated nature of offerings from operators, traditional ISVs, start-ups and mobile middleware players.
In the device OS market, as at desktop level and in the server-room, Linux clearly represents a threat to Microsoft, and one it expends much energy playing down. Although there has been little uptake of Linux to date specifically as an operating system for multimedia cell phones, there are many who are not keen to implement end-to-end Microsoft solutions. Linux will give these companies added freedom in choosing applications, middleware…… [Read More]