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  • Company Analysis: Fundamental Analysis - A Top-Down Approach

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    Syeda Dilawaiz
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    This document discusses company analysis as part of fundamental analysis. It explains that company analysis is important for determining the intrinsic value of a company's shares in order to make investment decisions. Key aspects to analyze include the balance sheet, income statement, cash flow statement, and notes to accounts. Both qualitative analysis of factors like management and marketing, as well as quantitative analysis using financial modeling techniques like the DuPont model are important. The DuPont model breaks down return on equity into other ratios like return on assets, asset turnover, and profit margins to better understand the drivers of a company's performance and earnings growth. The document also discusses calculating a company's sustainable internal growth rate.

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    Company Analysis

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    This document discusses company analysis as part of fundamental analysis. It explains that company analysis is important for determining the intrinsic value of a company's shares in order to make investment decisions. Key aspects to analyze include the balance sheet, income statement, cash flow statement, and notes to accounts. Both qualitative analysis of factors like management and marketing, as well as quantitative analysis using financial modeling techniques like the DuPont model are important. The DuPont model breaks down return on equity into other ratios like return on assets, asset turnover, and profit margins to better understand the drivers of a company's performance and earnings growth. The document also discusses calculating a company's sustainable internal growth rate.

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    © All Rights Reserved
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    23 views12 pages

    Company Analysis: Fundamental Analysis - A Top-Down Approach

    Uploaded by

    Syeda Dilawaiz
    This document discusses company analysis as part of fundamental analysis. It explains that company analysis is important for determining the intrinsic value of a company's shares in order to make investment decisions. Key aspects to analyze include the balance sheet, income statement, cash flow statement, and notes to accounts. Both qualitative analysis of factors like management and marketing, as well as quantitative analysis using financial modeling techniques like the DuPont model are important. The DuPont model breaks down return on equity into other ratios like return on assets, asset turnover, and profit margins to better understand the drivers of a company's performance and earnings growth. The document also discusses calculating a company's sustainable internal growth rate.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Flag for inappropriate content
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    of 12

    Company

    Analysis
    Fundamental Analysis A
    Top-Down Approach
    Company Analysis
    Why to Analyze?
    What to care about?
    What is Company Analysis

    Why to Analyze?
    After industry analysis i.e. selection of industry, a company
    is required to be selected or identified for investment
    Each company has a separate profile, set-up, performance
    and prospects
    Company is the bottom line where investment is to be
    made
    Investor need to find intrinsic value of share of company
    Intrinsic value is a function of dividend which depend
    upon earning of the company.
    Earning depend upon sale, operating, financial costs
    and taxation.
    Therefore, in order to determine the earnings,
    dividend and growth, a company is required to be
    analyzed.



    What to care about?
    Balance sheet
    Income statement
    Cash Flow statement
    Notes to accounts
    Certifying the statements
    Reported earning-GAAP
    Quality of earning
    What is company Analysis
    Qualitative Analysis
    Management
    Technical
    Marketing
    Quantitative Analysis
    Financial Statements
    Earnings Analysis A Dupont Approach
    Finding Sustainable Growth Rate
    Estimating future Earnings
    Quantitative Analysis-A
    Dupont Model

    V = EPS x P/E Ratio

    EPS A culmination of several
    important factors going on in a
    business like ROE, BV of a share,
    ROA, Leverage, profit margin and
    asset turnover ratios


    Quantitative Analysis-A Dupont
    Model-Decomposing ROE
    EPS = ROE x Book Value per share

    EPS = Net Income/Shares
    Outstanding
    ROE = Net Income/Shareholders
    Equity
    Book Value = Shareholders Equity/
    shares outstanding
    Quantitative Analysis-A
    Dupont Model
    ROE = ROA x LEVERAGE

    ROA = Net Profit/Total Assets
    Leverage = Total Assets/
    Stockholders 0Equity

    Quantitative Analysis-A
    Dupont Model
    ROA = Net Income Margin x Asset
    Turnover

    Net Income Margin=Net Income
    /Sales
    Asset Turnover = Sales/Total
    Assets
    Internal Sustainable Growth
    Rate

    The rate at which company grows
    from internal sources without raising
    additional equity or debt

    Additional Equity causes dilution
    Additional debt results into
    financial risk.
    Internal Sustainable Growth
    Rate (g)-How to calculate.

    g = ROE x Retention ratio

    Retention ratio = 1-Payout ratio
    Payout ratio = Dividend/Earning per
    share

    Forecasting Earning
    Periodical Financial Statements
    Company Guidance/Announcements
    Own Estimates
    Whispers
    Surprises & Standardization thereof

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