FINC 330 Project Description
This project is closely aligned with the Course Outcomes and Finance Program Objectives. Completion of this project can be used as part of a portfolio to show potential employers the student is skilled at performing company valuations and financial statement analysis and can be included on the student’s resume.
Bond and Stock Performance Analysis
OBJECTIVE
In this part of the project you are to assume to have been hired to join a team serving as an internal financial analyst to THE COMPANY. Your client plans to invest in bonds and (or) stocks issued by THE COMPANY (SELECTED BY INSTRUCTOR). In part 6 of the assignment you are asked to provide some recommendations to THE COMPANY’S management.
THE COMPANY for part 2 of the project can be the company that you were using for the Research Project Part 1 or ANOTHER COMPANY determined by your professor. THE COMPANY for this part of the project must have bonds listed on the website http://finra-markets.morningstar.com/BondCenter/Default.jsp. To find the information on bonds, click on Search in the middle of the screen (under Market Center Bond Guide), under Quick Search type the Issuer Name and the Symbol, and click SHOW
RESULTS.
Alternatively, you can request approval of another publicly traded company. This request must be submitted before the end of the first week of the course. The request must include
• identification of the company by ticker symbol and name
• a reasonable and appropriate explanation of why you want to examine the alternative company
• the source of the analyst’s report that will be used in the analysis (which must be submitted to me)
• acknowledgement by you that all the specific elements of the assignment (see below) will be prepared by you and included in the final research project report
SUGGESTED WEBSITES
www.morningstar.com – To find the information for your company you need to type the stock symbol in the Quotes window to get into the company’s page.
http://finra-markets.morningstar.com/BondCenter/Default.jsp – To find the information on bonds, click on Search in the middle of the screen (under Market Center Bond Guide), under Quick Search type the Issuer Name and the Symbol, and click SHOW RESULTS.
https://markets.businessinsider.com/bonds. To find the information on bonds, scroll down the page, type the name of the company in the window under Bond Finder, and click SEARCH.
www.marketwatch.com -To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.
www.money.cnn.com -To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.
www.finance.yahoo.com – To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.
www.nyse.com – Click on Data, then click on Stocks (under Quotes), and type the name of the company or the stock symbol in the window “Keyword or symbol” to get into the company’s page.
www.nasdaq.com – To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.
Company’s websites
YOUR SPECIFIC ASSIGNMENT
Using the information from the websites the student will develop evaluation of bond and stock performance for THE COMPANY (SELECTED BY INSTRUCTOR). (The evaluation portion will total 85% of the assignment grade)
-1—Introduction (3% of the project grade)- The paper should begin with a short introduction that explains the purpose of the paper, and provides an overview of the contents that follow (one short paragraph).
-2- The financial leverage ratios (15% of the project grade)
a) Find the financial leverage ratios for THE COMPANY assigned for you of the project for the last 3-5 years in the Internet. Present these ratios as the table(s) in your project.
You can find these ratios in the Internet or calculate them. If you use published ratios you must indicate that and cite their source.
• Debt-to-assets ratio (Debt ratio)
• Debt-to Equity ratio
• Interest Coverage ratio (the Times Interest Earned)
b) Write (about) 1 page of the analysis of the ratio results. In your analysis you should answer the following questions. explain your answer to each question.
How is THE COMPANY financing its assets? Discuss how much risk is associated with the financial structure the company? How can this risk be measured? Please explain.
-3- Collect and evaluate the data about bond performance of the assigned company. (20% of the project grade).
The information on bonds can be found on the website http://finra-markets.morningstar.com/BondCenter/Default.jsp. To find the information on bonds, click on Search in the middle of the screen (under Market Center Bond Guide), under Quick Search type the Issuer Name and the Symbol, and click
SHOW RESULTS.
Another useful website on bond information is https://markets.businessinsider.com/bonds. To find the information on bonds, scroll down the page, type the name of the company in the window under Bond Finder, and click SEARCH.
Important: Copy the quotations of two bonds issued by THE COMPANY (SELECTED BY INSTRUCTOR) that contain the Price. Present these quotations in your project.
1. What were the last prices of the bonds (listed in the Last Sale column)? Assume that par value of the bond is $1,000. How much the investor will pay for the bond if he/she purchased the bond at the Price listed in the Last Sale column. Show your work in your project.
2. Assume that par value of the bond is $1,000. Calculate the annual coupon interest payments. Show your work in your project.
3. Assume that par value of the bond is $1,000. Calculate the current yield of the bonds. Show your work in your project.
4. How much is the YTM listed in quotations of the bonds (in the Last Sale column – Yield) (no calculations are required for this question?
5. Write a 1-2 page of the analysis of the bonds. In your analysis you should answer the following questions. Please explain your answer to each question.
a) If you are going to buy a bond issued by THE COMPANY, which bond would you choose? Why?
b) Are these bonds callable? If the bonds that you chose are callable (non-callable), will it change your decision to buy them?
c) If you are an investor who is looking for a bond to invest in, are you going to buy a bond that you chose? Take a look at the balance sheet and income statement of the company. What data or ratios support your decision to buy this bond or not? You may want to incorporate the results of the Research Project Part 1, as well as the results of the financial leverage ratios to answer this question. You should develop a specific recommendation, with supporting rationale for the investor to explain your answer.
-4- Collect and evaluate the data about stock performance of the assigned company for the last one year. (Totally 30% of the project grade).
1) Find the market ratios for the company for the last 1-3 years and its major competitor for the last year in the Internet. (15% of the project grade)
• Price/Earnings ratio
• Market/Book ratio (also called (Price/Book ratio)
• Earnings per share
• Dividends per share
• Other market ratios on your choice
These ratios are available on www.morningstar.com > Company’s page – under Valuation, Financials, and under Dividends
You can find these ratios in the Internet or calculate them. If you use published ratios you must indicate that and cite their source.
a. Present the market ratios as the table(s) in your project.
b. Write about 1 page of analysis of the market ratio results that you found. Compare the market ratio results against the industry or main competitor. In your report answer the question: Are the common stockholders receiving an adequate return on their investment?
c. Compare the P/E ratio of your company with the industry average or 5-year average. Is the stock overvalued, undervalued, or properly valued? Why?
d. In accordance with your findings, is it reasonable to buy the stock? Please explain your answers.
-2) Analysis of the historical stock prices trend for the last year. (15% of the project grade)
a. Collect and evaluate the data about stock prices of the assigned company for the last one year for the company and its major competitor.
b. Create the chart(s) using the stock price chart tools on the websites or Excel. Present the chart(s) in your project.
c. Write about 0.5 page of analysis the historic stock prices trend for the last year.
In accordance with your findings, is it reasonable to buy the stock? Why? Please explain your answer.
-5- Develop a specific recommendation, with supporting rationale for the COMPANY’S management – Think about the financial strategy of the company, how to best balance THE COMPANY’S financial leverage to optimize shareholder wealth going forward taking into consideration the company’s current market position, credit rating, dividend policy, etc. (12% of the project grade).
-6- Reflection – the students should write a paragraph in their own words reflecting on what they learned from the assignment and how they think they could apply what they learned in the workplace. (5% of the project grade).
