Q.

Pick one lesson that you chose from the 15 points in Chapter 3, and apply that point to
the 4 companies that you worked for valuation project. Make a report on your findings in
200~300 words.

The fifth point in chapter 3 asks whether the company have a worthwhile profit margin.
Please refer to the graph below.

Changes in profit margin of Nike and Under Armour show a striking difference. Nike’s
profit margin has gradually grown over the past 4 years while Under Amour’s profit margin has
diminished over the same period. According to Fisher’s fifth point, two companies’ change in
profit margin explains the change in their stock prices. From October 12, 2017 to November 29,
2017, Nike’s stock price increased by 17.21% when Under Armour’s decreased by 24.38%. The
fifth point was indeed right in this case because profit margin growth is positively related to
stock price growth.

However, in case of Samsung Electronics and LG Electronics, the fifth point seems not
enough to explain the two companies’ change in stock price. From October 12, 2017 to
November 29, 2017, Samsung Electronics’ stock decreased by 4.01% while LG Electronics’
increased by 3.98%. Both companies’ profit margin has fluctuated over the last 5 years. Thus,
the fifth point does not sufficiently explain the change in their stock prices. It can be, though,
inferred that the fluctuating net profit of Samsung and LG explains why the change in stock
prices of Samsung and LG is smaller than the one of Nike and Under Armour.