Financial Statement Analysis and EPS ForecastingReport Assignment.
Choose a publicly traded company to analyze this semester. Choosing a US company which has been trading for more than 3 years will alleviatemany issues (i.e. translating currencies). Gather historic data on key financial statements of the firm from either SEC filings.
These include:
Balance Sheet
Income Statement
Cash Flow StatementAlso collect necessary information like stock price, shares outstanding,dividends paid,etc.Then prepare aprofessionalreport to answer the following questions:
1.Compute the following ratios for the firm that you are analyzing, for the most recent period:
2.Comment on the financial condition of the firm in each of the above 5categories in 2or 3sentences each.Use the ratios of your firm as evidence of your assertions by comparing it to some benchmark(historical ratios, competitors, market or industryaverage, etc.). If certain ratios are not applicable to your firm (if your firm doesn’t have debt or inventory, for example), still write on these ratios and how the absence of these items affects the firm –both the costs and benefits.
3.Decompose the ROE of your firm using the extended Du.
4.Compare these components of ROE for the firm’s current period its past periods to understand the time trends.
5.Compare these components of ROE for the firm’s with its major competitor(s).
6.Now use thetrends from questions 4 and 5 along with yourown forecast of future macro-economic conditions to forecast the firm’s Earnings per share and cash flow per share. See the Sample Financial statement analysis in the course content for an example.
To do this:
a.Make a common sized income statement for the last 3 to5 years(every number as a percentage of revenue/sales).
b.Measure the revenue growth for each year in the historical window.c.Forecast futurerevenue growth both quantitatively (for example, using a linear fit trend line/regression) and qualitatively.
d.Produce forecasted income statements for futureyears using your revenue growth projections and common-sizedbalance sheets. Adjust items in income statement based on trends you see in past data, competitors, and the economy as a whole.
