Objective of the final project: Each student is assigned a company (by email) and conducts a basic financial and investment assessment of a stock from the Value Line Stock Report. The purpose is to apply some of the topics we have covered throughout the semester to an actual corporation.
Instructions: Please answer each of the following 25 questions about the common stock investment. Each question is worth 4 points.
Presentation of Answers: Please number the answers 1 through 25.
1) Business Overview: What is the name of your company? What business (industry) is the common stock from? (Provide a brief description) How many employees does the corporation employ?
2) Basic Financial Information: What is the ticker symbol and stock market the corporation is listed on? What is the total market cap of the company? Is the stock a large cap or a mega cap stock?
3) Describe the capital structure of the company. In other words, does the company have Total Debt? LT Debt? Preferred Stock? Common Stock? Etc. If so, provide the dollar amounts for each of these items.
4) Institutional and Insider Ownership: What are the names (companies, individuals) with the actual percentages they own for shareholders that own 5% or more of the company stock? What percentage of common stock is owned by directors and officers?
5) Beta: What is the beta of the stock? Is the stock more or less risky than the average stock in the market? (Assume the average stock has a beta of 1.0)
6) Relative P/E Ratio: How would you assess the “Relative P/E Ratio” for the past actual six years? In other words, has the stock been overvalued or undervalued? (Remember to list the six years of ratio data as part of your answer.)
7) Timeliness rank: What is the Timeliness rank for the stock? Please interpret this financial ranking.
8) Safety rank: What is the Safety rank for the stock? Please interpret this financial ranking.
9) Technical rank: What is the Technical rank for the stock? Please interpret this financial ranking.
10) Company’s Financial Strength rank: What is the Company’s Financial Strength rank for the stock? Please interpret this financial ranking.
11) Stock’s Price Stability rank: What is the Stock’s Price Stability rank for the stock? Please interpret this financial ranking.
12) Price Growth Persistence rank: What is the Price Growth Persistence rank for the stock? Please interpret this financial ranking.
13) Earnings Predictability rank: What is the Earnings Predictability rank for the stock? Please interpret this financial ranking.
14) Return on equity (shareholder equity): How would you interpret this ratio for 2022? What is the actual return on equity (shareholder equity) for the past five years? Describe the overall trend of this financial ratio over this five-year period.
15) Return on total capital (return on invested capital): How would you interpret this ratio for 2022? What is the actual return on total capital (return on invested capital) for the past five years? Describe the overall trend of this financial ratio over this five-year period.
16) Time Value of Money Exercise: Take the recent price of the stock (April 5, 2022) on the Value Line Report; assume an 7.5% return, what is the expected price of the stock in 10 years? (Please document the Time Value of Money calculation.)
17) You will make an initial investment of $5,000 in the stock on January 12, 2023, and your taxable income this year is $50,000 as a single taxpayer. Lookup the share price (closing price) as of January 12, 2023, for the stock at http://finance.yahoo.com
(Click on Historical Data)
Apply the formula: The Initial Investment Divided by the Share Price =
# of Shares Owned
How many shares of the stock did you purchase?
Sell the stock (all the shares) on April 10, 2023, what is the total capital gain or loss on the stock in dollars based on the current tax law? What is the tax liability or tax savings on this investment? What is the net tax gain or loss on this transaction?
18) and 19) Fill out the following two risk questionnaires:
Survey 1: Internet exercise: What is your Investment Risk Tolerance?
Take the quiz and view the results.
https://pfp.missouri.edu/research/investment-risk-tolerance-assessment/
Survey 2: Worksheet 44: Investment Risk Tolerance
What are the actual scores from both risk surveys? Do the two risk tolerance questionnaires classify you as the same type of risk-taker? Please explain. Also, provide a discussion of what questions on the survey you find most relevant to your personal assessment of risk and why?
Read over pages 355 to 357 of the “Risk Tolerance Readings” and refer to the chart on page 9 of my handout “Socioeconomic Differences in Risk Attitudes” about the notion of risk tolerance; incorporate the themes of this discussion to the results of whether you are: 1) Conservative Investor; 2) Moderate Investor; 3) Aggressive Investor
(Please limit your answer for Question 18 and 19 to 200 words.)
20) Overall Risk Assessment; How does the stock’s beta and Safety Rank compare with your risk tolerance category? Is the stock a good fit based on your risk tolerance category? Please explain. (Note: Risk tolerance category is 1) Conservative Investor; 2) Moderate Investor; 3) Aggressive Investor)
21) Please select two unique financial related items from the Value Line report (exclude items from questions 1 through 15) based on your viewpoint please explain why each of these items are important for evaluating your stock/company.
22) Provide a SWOT Analysis of the Company: What are some Strengths and Weaknesses of the company? (List your answer in bullet points.)
23) Provide a SWOT Analysis of the Company: What are some Opportunities and Threats of the company? (List your answer in bullet points.)
Note: For questions 21, 22, and 23 use the case study of the snack company (Problem 4-26) as a reference point, what is the financial health of your company? What is the company’s overall health?
24) and 25) Your investment decision: Would you buy, hold, or sell this stock? Explain in detail. Note: Utilize information from the Value Line report to support your investment decision. (Assume you already own a diversified portfolio of bonds and stocks as well you are a long-term investor.) (Please limit your answer for Question 24 and 25 to 250 words.)
