Financial Analysis
Your report should include the following parts:
1) Company background: Briefly describe the company’s activities and history and include any major event that took place in the last 3 years (major investments, mergers, spin-offs, new line of activity, stock issue, etc.).
2) Industry trends: Anything noticeable in the company’s industry in recent years? Who are your company’s 2 major competitors?
3) Ratio Analysis: Going back 3 years, your ratio analysis should include liquidity, asset management, profitability, and debt management ratios, as well as ratios related to the performance of the stock. Aside from analyzing trends, you should compare your ratios with industry averages or, if not available, with the ratios of one of your company’s main competitors. Remember that ratios are significant only when analyzed over a trend of at least 3 years, and also, when compared with similar companies.
4) WACC determination: Try to determine your company’s current Weighted Average Cost of Capital (WACC). The information is noy readily available, so you are going to have to construct on your own with a bit of research and some assumptions.
5) Conclusion and Recommendations: What are the financial strengths and weaknesses of this company? What changes, if any, would you recommend management should implement to improve its financial performance and condition?
6) Buy or sell the company’s stock? Justify your answer.
