FINANCIAL ANALYSIS AND STOCK SELECTION
Student is required to perform financial analysis of two companies, AMC and CNK by comparing them to each other or the industry average. The student is required to submit a this as a report. Schedule (see the attached Instructions for the Financial Analysis and Stock Selection Project). The grade associate with this project will be based on the followings: investment philosophy and stock analysis.
**Using YAHOO FINANCE**
The analysis should include the followings:
Investment philosophy
Economic and Industry Outlook
Stock selection criteria
A brief description of each company and its products/services (revenue model). Company’s management and business strategy, competitors, company’s business risk and financial risk.
Graphs: Asset, Revenues (sales), Net Income (last 3 years), stock prices (1 year).
Financial Statement Analysis: Common Size Statement Analysis, Cash Flow Statement Analysis
Financial Ratio Analysis (Compare Debt Ratio, ROE, ROA, Profit Margin, P/E Ratio to industry average). Please comments of your analysis.
Projected data: Earnings, Cash Flow and Dividends (next 3-5 years)
Valuation analysis: (a) Compare the required rate of return (Kr) and the Expected Rate of
Return (Ke) or (b) Compare the company’s current stock price and the intrinsic value of the
company’s stock.
The reasons which this stock was selected
Look up the stocks’ beta.
INSTRUCTIONS FOR THE FINANIAL ANALYSIS AND STOCK SELECTION GROUP PROJECT
Chapters 3, 4, 8 and 9 from Fundamentals of Financial Management, Concise 10th edition, provide a good discussion and procedures in analyzing a company’s financial statements, financial ratios and valuation analysis.
Required to submit a written report of the following:
1. Perform Financial Statement Analysis of AMC Entertainment Holdings (AMC) and Cinemark Holdings, Inc. (CNK) within the same industry:
Common Size Statement Analysis of the Balance Sheet and the Income Statement (see the lecture PPT slides, compare the data of the selected 2 companies—no industry average data is required for Common Size analysis).
Analyze the Balance Sheet, Income Statement and Statement of Cash Flows: provide comments based on your observation – which company has better financial data?.
2. Perform Financial Ratios Analysis of AMC and CNK: Utilizing the company’s financial statements, please calculate the following ratios:
Long-Term Debt to Equity (or Total Debt to Total Asset)
ROE
Net Profit Margin
P/E ratio (please show your calculations)
3. Compare the above financial ratios of AMC and CNK (OR with the Industry Average, if available) (see Chapters 3 and 4).
4. Perform Valuation Analysis: Determine and compare the Expected Return (Ke) and the Required Return (Kr) of each stock (see Chapters 8 and 9); OR calculate the Appraised (intrinsic) Value of the each company’s stock and compare this value with the company’s current stock price. Provide comments based on the above results. “Google” the latest Treasury bill rate (Risk-free rate). See attached sheet for RPm.
5. Based on the above analysis: Select One Company (one of the two)
6. Provide a brief description of the selected company, its products/services, its management and the company’s business strategy
7. Discussion of the selected company’s financial strength and reasons which this stock should be selected for investment.
8. Provide the selected company’s stock symbol (look up in yahoo.com (finance)
9. Provide the selected Company’s closing stock price (look up in yahoo.com (finance)
10. For the Final Report: Please submit (1) all calculations of Common Size statements, financial ratios and Appraised Values (2) discussions and conclusions.
Put in the appendix: The balance sheets, Income statements, Statements of Cash Flow (of the 2
companies).
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