The ultimate goal is to decide which company is best positioned to provide the most shareholder value in the future. This would require you to conduct the following analysis:
1) Identify an industry to focus on (It is suggested that you use an industry that is expanding rather than consolidating, but the choice is yours to make). Explain why you chose this industry and its environment.
2) Identify the top companies in the industry using your own selection of criteria (market capitalization, ROE, or any other financial criteria you wish to develop.) Your decisions on which set of criteria to use, are to be considered part of the project and your rationalization must be explained.
3) Compile a ratio analysis of the top competitors in the industry using the company’s financial statements. You should limit the number of companies you are researching to between 35.
The ratio analysis should include:
a) a 5 year trend analysis of each company selected and compared to the industry averages and
b) a competitive analysis of the selected major competitors using four main standards: profitability, liquidity, debt and return on equity.
4) Establish growth projections for the top competitors using established methods, including pro forma income statements and balance sheets for the coming year.
5) Analyze the following elements of the major competitors:
[It is expected that you will discuss why you selected the measures used, interpret the data and explain what this information suggests about the company’s financial situation and future financing needs.]
a) Each company’s capital structure
b) Cost of capital, capital structure, CAPM, cash flow, value of common stock and MVA.
6) You are expected to look at a potential takeover target for the company (within the industry or closely related to the industry), evaluate the takeover and the price to be paid for the target using established valuation criteria. It is expected that you will discuss the selection of the criteria used and to comment on its relative value in the analysis.
It is expected that you will comment on the industry’s environment, as well as the business and financial risks that face the industry and the major competitors in that industry. It will be necessary to discuss the near term economic forecast and include a discussion of any important changes that may take place in terms of the potential growth of the market, impact on the availability and cost of capital and any basic resources the company will need to succeed.
After selecting the main competitors and conducting your analysis you will need to choose one company as the projected future industry leader and project its future stock price in light of your review and analysis.
Your research should include a survey of business periodicals, industry data from scholarly sources, analyst reports, news articles and journals as appropriate. When using financial calculations, you must show your math. How did you do the calculations? Using a financial calculator is fine, Excel is recommended, but I need to know if you understand the data. For example, if you did a ROE calculation on a financial calculator, I need to see more than just the end result, i.e. what data you used to make the calculations.
The discussion portion of the paper should be 8-10 pages in length, double spaced, and employ APA style criteria. Also in text citations and a reference page is required when using other authors' works. Keep in mind that supporting data should be submitted in less than 4 separate attachments. The attachments and title page are NOT counted toward the total page count. For example attachments should include, proforma income statement, balance sheets, etc.
These solutions may offer step-by-step problem-solving explanations or good writing examples that include modern styles of formatting and construction of bibliographies out of text citations and references. Students may use these solutions for personal skill-building and practice. Unethical use is strictly forbidden.1. Industry choice
This analysis will focus on the Aerospace/Defense Products & Services industry. In particular, the analysis will focus on three companies namely: Lockheed Martin Corporation, The Boeing Company and Raytheon Company. The industry was chosen because of the stock price fluctuation that industry players have faced in the financial market which presents a good opportunity for me to practice stock price analysis as well as financial statement analysis. Lockheed Martin’s stock price has climbed by around 135% over the last two years after a period of decline. Interestingly, Boeing’s revenue exceeded Lockheed Martin’s by over $50 billion in 2015, but in terms of EPS and P/E Lockheed Martin performed better than Boeing. Additionally, Boeing’s market capitalization is $89.3 billion as compared to Lockheed Martin’s $70.4 billion in an industry where the average market capitalization is $1.2 billion. The chosen industry will give me an opportunity to examine why performance indicators differ across companies.
Another reason for choosing the Aerospace/Defense Products & Services industry is the nature of industry players’ operations and the structure of their financial statements....
By purchasing this solution you'll be able to access the following files:
Solution.docx, SolutionRegression.xlsx and SolutionTrendsRatios.xlsx.