投资学全英文8综述课件

Chapter 7Analyzing Common StocksCopyright 2014 Pearson Education,Inc.All rights reserved.7-2 Analyzing Common StocksLearning Goals1.Discuss the security analysis process,including its goals and functions.2.Understand the purpose and contributions of economic analysis.3.Describe industry analysis and note how it is used.4.Demonstrate a basic appreciation of fundamental analysis and why it is used.Copyright 2014 Pearson Education,Inc.All rights reserved.7-3 Analyzing Common StocksLearning Goals(contd)5.Calculate a variety of financial ratios and describe how financial statement analysis is used to gauge the financial vitality of a company.6.Use various financial measures to assess a companys performance,and explain how the insights derived from the basic input for the valuation process.Copyright 2014 Pearson Education,Inc.All rights reserved.7-4 What is Security Analysis?“The process of gathering information,organizing it into a logical framework,and then using it to determine the intrinsic value of a share of common stock.”Copyright 2014 Pearson Education,Inc.All rights reserved.7-5 What is Intrinsic Value?Intrinsic ValueThe underlying or inherent value of a stock,as determined through fundamental analysisA prudent investor will only buy a stock if its market price does not exceed what the investor thinks the stock is worth.Intrinsic value depends upon several factors:Estimates of future cash flowsDiscount rateAmount of riskCopyright 2014 Pearson Education,Inc.All rights reserved.7-6“Top Down”Approach to Traditional Security AnalysisStep 1:Economic AnalysisState of overall economyStep 2:Industry AnalysisOutlook for specific industryLevel of competition in industryStep 3:Fundamental AnalysisFinancial condition of specific companyHistorical behavior of specific companys stockCopyright 2014 Pearson Education,Inc.All rights reserved.7-7 Efficient Market HypothesisEfficient Market:the concept that the market is so efficient in processing new information that securities trade very close to or at their correct values at all timesEfficient market advocates believe:Securities are rarely substantially mispriced in the marketplaceNo security analysis is capable of finding mispriced securities more frequently than using random chanceCopyright 2014 Pearson Education,Inc.All rights reserved.7-8 Who Needs Security Analysis in an Efficient Market?Fundamental analysis is still important because:All of the people doing fundamental analysis is the reason the market is efficientFinancial markets may not be perfectly efficientPricing errors are inevitableCopyright 2014 Pearson Education,Inc.All rights reserved.7-9 Step 1:Economic AnalysisEconomic Analysis is the study of general economic conditions that is used in the valuation of common stock.Stock prices are heavily influenced by the state of the economy and by economic events on both a global and domestic basis.The behavior of the economy is captured in the business cycle,which reflects changes in total economic activity over timeCopyright 2014 Pearson Education,Inc.All rights reserved.7-10 Key Economic MeasuresGross Domestic Product(GDP):market value of all goods and services produced in a country over the period of a yearGenerally,as GDP goes the economy goesIndustrial Production:measure of the activity/output in the industrial or productive segment of the economyGenerally,as production goes the economy goesCopyright 2014 Pearson Education,Inc.All rights reserved.7-11 Key Economic Factors that Affect the Business CycleGovernment Fiscal PolicyTaxesGovernment spendingDebt managementMonetary PolicyMoney supplyInterest ratesOther FactorsInflationConsumer spendingBusiness investmentsForeign tradeCurrency exchange ratesCopyright 2014 Pearson Education,Inc.All rights reserved.7-12 Other Key Economic MeasuresEconomic MeasureWhat It TracksIndex of Leading Indicators“Predicts”direction of GDPPersonal IncomeConsumer buying habitsRetail SalesConsumer attitudesMoney SupplyGrowth of economy&inflationConsumer Prices/InflationProducer PricesEmploymentBusiness ProductionHousing StartsAvailability&cost of moneyCopyright 2014 Pearson Education,Inc.All rights reserved.7-13 Table 7.2 Economic Variables and the Stock MarketCopyright 2014 Pearson Education,Inc.All rights reserved.7-14 Sources for Economic OutlookWall Street JournalBarronsFortune,Business Week,ForbesGovernment PublicationsBrokerage firm/commercial bank reportsCopyright 2014 Pearson Education,Inc.All rights reserved.7-15 How Do We Use the Economic Outlook?Use it to identify areas for additional researchWhat industries will benefit?What industries will be hurt?Use it to evaluate individual companiesWill sales/profits go up or down?Copyright 2014 Pearson Education,Inc.All rights reserved.7-16 Important Point to Remember!Stock prices usually change before the actual forecasted changes become apparent in the economyStock price trends are another leading indicator often used to help predict the direction of the economy itselfCopyright 2014 Pearson Education,Inc.All rights reserved.7-17 Step 2:Industry AnalysisEvaluate the competitive position of a particular industry in relation to other industriesLooking for new opportunities&growth potentialIdentify companies within the industry that look promisingLooking for strong market positions,pricing leadership,economies of scale,etc.Copyright 2014 Pearson Education,Inc.All rights reserved.7-18 Issues that Affect an IndustryWhat is the nature of the industry?Is the industry regulated?What role does labor play in the industry?How important are technological developments?Which economic forces have the most impact on the industry(e.g.,interest rates,foreign trade)?What are the important financial and operating considerations(e.g.,access to capital)?Copyright 2014 Pearson Education,Inc.All rights reserved.7-19 Growth Cycle Stages and InvestmentsGrowth Cycle reflects the vitality of an industry or a company over time.Initial Development:industry is new and risks are very highRapid Expansion:product acceptance is growing and investors become very interestedMature Growth:expansion comes from growth in the economy and returns are more predictableStability or Decline:demand for product is diminishing and investors avoid this stageCopyright 2014 Pearson Education,Inc.All rights reserved.7-20 Sources for Industry OutlookTrade publicationsWall Street JournalFortune,Business Week,ForbesStandard&Poors Industry SurveysBrokerage house reportsYahoo!FCopyright 2014 Pearson Education,Inc.All rights reserved.7-21 Step 3:Fundamental AnalysisEvaluate the financial condition and operating results of a specific companyCompetitive positionComposition and growth in salesProfit margins and dynamics of earningsAsset mix(i.e.cash balance,inventory,accounts receivable,fixed assets)Financing mix(i.e.debt,stock)The value of a stock is influenced by the financial performance of the company that issued the stockCopyright 2014 Pearson Education,Inc.All rights reserved.7-22 Where Do We Start?Interpreting Financial StatementsUsing Financial RatiosFundamental analysis is often the most demanding and most time-consuming phase of stock selectionCopyright 2014 Pearson Education,Inc.All rights reserved.7-23 Financial Statements:The Balance SheetSummary of a companys assets,liabilities,and shareholders equity at a point in timeAssets:what the company owns(i.e.cash,inventory,accounts receivable,equipment,buildings,land)Liabilities:what the company owes(i.e.bills,debt)Equity:capital the stockholders have invested in the companyWhat are we looking for on the balance sheet?Relative amounts(large vs.small)Trends(improving vs.decreasing)Copyright 2014 Pearson Education,Inc.All rights reserved.7-24 Table 7.3 Corporate Balance SheetCopyright 2014 Pearson Education,Inc.All rights reserved.7-25 Financial Statements:The Income StatementSummary of a companys operating results over a specific period of time,usually one yearRevenues:funds received for providing products and/or servicesExpenses:funds used to pay for materials,labor,and other business costsProfit/Loss:revenues less expensesWhat are we looking for on the income statement?Relative amounts(large vs.small)Relationships(Are expenses growing faster or slower than revenues?)Trends(improving vs.decreasing)Copyright 2014 Pearson Education,Inc.All rights reserved.7-26 Table 7.4 Corporate Income StatementCopyright 2014 Pearson Education,Inc.All rights reserved.7-27 Financial Statements:The Statement of Cash FlowsSummary of a companys cash flows and other events that caused changes in companys cashSources of Cash:proceeds from sale of products/services,sales of equipment,borrowing money,sale of stockUse of Cash:payment of wages and/or materials,payment of operating expenses,purchases of equipment,payment of debt,payment of dividendsWhat are we looking for on the cash flow statement?Relative amounts(more cash or less cash)LiquidityTrends(improving vs.decreasing)Copyright 2014 Pearson Education,Inc.All rights reserved.7-28 Table 7.5 Statement of Cash FlowsCopyright 2014 Pearson Education,Inc.All rights reserved.7-29 Sources for Financial Statements Companys Annual Report Companys 10K Companys 10Q Securities&Exchange Commissionwww.sec.gov Standard&Poors or Moody Reports Internet financial portals Brokerage firm reportsCopyright 2014 Pearson Education,Inc.All rights reserved.7-30 Key Financial RatiosStudy of the relationships between financial statement accountsPurpose is to develop information about the past that can be used to get a handle on the future“X-rays”of the financial statements to look for meaningful relationships between numbersLooks at companys historical trends to see if improving or decliningLooks at industry standards to see how company compares to competitorsCopyright 2014 Pearson Education,Inc.All rights reserved.7-31 Major Groups of Financial RatiosLiquidity Ratios:the companys ability to meet day-to-day operating expenses and satisfy short-term obligations as they become dueActivity Ratios:how well the company is managing its assetsLeverage Ratios:amount of debt used by the companyProfitability Ratios:measures how successful the company is at creating profitsCommon Stock Ratios:converts key financial information into per-share basis to simplify financial analysisCopyright 2014 Pearson Education,Inc.All rights reserved.7-32 Liquidity RatiosCurrent Ratio:how many dollars of short-term assets are available for every dollar of short-term liabilities owedHigher ratio:more liquidityLower ratio:less liquidityCopyright 2014 Pearson Education,Inc.All rights reserved.7-33 Liquidity Ratios(contd)Net Working Capital:how many dollars of working capital are available to pay bills and grow the businessHigher amounts:firm makes large investments in working capitalLower amounts:firms operates with less working capitalCopyright 2014 Pearson Education,Inc.All rights reserved.7-34 Activity RatiosAccounts Receivable Turnover:how quickly the company is collecting its accounts receivable(sales to customers on credit)Higher ratio:betterLower ratio:worseCopyright 2014 Pearson Education,Inc.All rights reserved.7-35 Activity Ratios(contd)Inventory Turnover:how quickly the company is selling its inventoryHigher ratio:betterLower ratio:worse Copyright 2014 Pearson Education,Inc.All rights reserved.7-36 Activity Ratios(contd)Total Asset Turnover:how efficiently the company is using its assets to support salesHigher ratio:betterLower ratio:worseCopyright 2014 Pearson Education,Inc.All rights reserved.7-37 Leverage RatiosDebt-Equity Ratio:how much debt the company is using to support its business compared to how much stockholders equity it is using to support its businessHigher ratio:more riskLower ratio:less riskCopyright 2014 Pearson Education,Inc.All rights reserved.7-38 Leverage Ratios(contd)Time Interest Earned:measures the ability of the firm to meet its fixed interest paymentsHigher ratio:less riskLower ratio:more riskCopyright 2014 Pearson Education,Inc.All rights reserved.7-39 Profitability RatiosNet Profit Margin:amount of profit earned from sales and other operationsHigher ratio:betterLower ratio:worseCopyright 2014 Pearson Education,Inc.All rights reserved.7-40 Profitability Ratios(contd)Return on Assets:amount of profit earned on each dollar invested in assets;measures managements efficiency at using assetsHigher ratio:betterLower ratio:worseCopyright 2014 Pearson Education,Inc.All rights reserved.7-41 Profitability Ratios(contd)Return on Equity:amount of profit earned on each dollar invested by stockholders;measures managements efficiency at using stockholders fundsHigher ratio:betterLower ratio:worseCopyright 2014 Pearson Education,Inc.All rights reserved.7-42 Breaking DownReturn on Assets(ROA)Breaking down ROA allows investors to identify the components that are driving company profits.Investors want to know if ROA is moving up(or down)because of improvement(or deterioration)in the companys profit margin and/or its total asset turnover.Copyright 2014 Pearson Education,Inc.All rights reserved.7-43 Breaking DownReturn on Assets(ROA)(contd)Breaking down ROE allows investors to identify the impact of financial leverage on company return.Investors want to know if ROE is moving up(or down)because of how much debt the company is using or because of how the firm is managing its assets and operations.Copyright 2014 Pearson Education,Inc.All rights reserved.7-44 Common Stock RatiosPrice/Equity Ratio:shows how the stock market is pricing the companys common stockOne of the most widely used ratios in common stock selectionOften used in stock valuation modelsHigher ratio:more expensiveLower ratio:less expensiveCopyright 2014 Pearson Education,Inc.All rights reserved.7-45 Common Stock Ratios(contd)What is the P/E ratio for a company with profits of$139.7 million,61,815,000 outstanding shares of common stock and a current market price of$41.50 per share?Copyright 2014 Pearson Education,Inc.All rights reserved.7-46 Common Stock Ratios(contd)Price/Earnings Growth Ratio(PEG):compares companys P/E ratio to the rate of growth in earningsRatio 1:stock may be fully valuedPEG=1:stock price in line with earnings growthRatio 1:stock may be undervaluedCopyright 2014 Pearson Education,Inc.All rights reserved.7-47 Common Stock Ratios(contd)Dividends per share:the amount of dividends paid out to common stockholdersCopyright 2014 Pearson Education,Inc.All rights reserved.7-48 Common Stock Ratios(contd)Payout Ratio:how much of its earnings a company pays out to stockholders in the form of dividendsTraditional payout ratios have been 40%to 60%Recent trends have been lower payout ratios,with more tax efficient stock buyback programs used frequentlyHigh payout ratios may be difficult to maintain and the stock market does not like cuts in dividendsCopyright 2014 Pearson Education,Inc.All rights reserved.7-49 Common Stock Ratios(contd)Book Value per Share:difference between assets and liabilities(equity)per shareA company should be worth more than its book value.Copyright 2014 Pearson Education,Inc.All rights reserved.7-50 Common Stock Ratios(contd)Price-to-Book Ratio:compares stock price to book value to see how aggressively the stock is being pricedHigher ratio:stock is fully-priced or overpricedLower ratio:stock may be fairly priced or underpricedCopyright 2014 Pearson Education,Inc.All rights reserved.7-51 Interpreting Financial RatiosSources of Ratio Analysis Standard&Poors Stock Reports Brokerage firm reports Value Line ReportsCopyright 2014 Pearson Education,Inc.All rights reserved.7-52 Figure 7.1 An Example of a Published Report with Financial Statistics(Source:Mergent,July 25,2012.2012)Copyright 2014 Pearson Education,Inc.All rights reserved.7-53 Interpreting Financial RatiosLook at historical ratio trends for the companyLook at ratios for the industryEvaluate the firm relative to two or three major competitorsTry to determine if the financial information is telling you a good story about the company or a bad storyUse the story to decide if you think the stock has intrinsic value for you as an investorCopyright 2014 Pearson Education,Inc.All rights reserved.7-54 Could There Be Trouble Brewing?The following financial statement developments could indicate a company heading for financial problems:Inventories and receivables growing faster than salesA falling current ratio,caused by current liabilities increasing faster than current assetsA high and rapidly increasing debt-to-equity ratio,suggesting problems with servicing debt in futureCash flow from operations dropping below net incomePresence of lots of indecipherable off-balance sheet accounts and extraordinary income entriesCopyright 2014 Pearson Education,Inc.All rights reserved.7-55 Chapter 7 ReviewLearning Goals1.Discuss the security analysis process,including its goals and functions.2.Understand the purpose and contributions of economic analysis.3.Describe industry analysis and note how it is used.4.Demonstrate a basic appreciation of fundamental analysis and why it is used.Copyright 2014 Pearson Education,Inc.All rights reserved.7-56 Chapter 7 Review(contd)Learning Goals(contd)5.Calculate a variety of financial ratios and describe how financial statement analysis is used to gauge the financial vitality of a company.6.Use various financial measures to assess a companys performance,and explain how the insights derived from the basic input for the valuation process.Chapter 7AdditionalChapter ArtCopyright 2014 Pearson Education,Inc.All rights reserved.7-58 Table 7.1 Keeping Track of the EconomyCopyright 2014 Pearson Education,Inc.All rights reserved.7-59 Table 7.6 Comparative Historical and Industry RatiosCopyright 2014 Pearson Education,Inc.All rights reserved.7-60 Table 7.7 Comparative Financial Statistics:Universal Office Furnishings and Its Major Competitors(All figures are for year-end 2013 or for the five-year period ending in 2013;$in millions)