FIN311 Northern Arizona University Starbucks financial analysis Here is the requirement of the one page analysis, since this is a group report and 2 people

FIN311 Northern Arizona University Starbucks financial analysis Here is the requirement of the one page analysis, since this is a group report and 2 people in our group are working on this financial statement analysis, so you only need to write one page and follow the requirements below. To be more clear, I also attached the whole project description if you want to look at, but what you need to mention is only the financial statement analysis of Starbucks.(You don’t have to do the beta)Financial statement analysis of starbucks using ratios
o When working on this section, remember that the purpose is to analyze the firm and
its financial position, not simply to calculate ratios. It is essential to make it clear in
your report and presentation what calculated ratios tell you about the company and
how you used this information in valuation.
o You are required to perform both (i) trend/historical and (ii) benchmark analysis. You
have to justify your choice of benchmark. For trend analysis, use at least three most
recent years of reported data. Keep in mind that the purpose of the project is to value the company. A common mistake made
by students is to spend too much time describing the company and its position and to spend
very little time on valuation. Grading guide: Financial statement analysis – Firm and its financial position is thoroughly analyzed using trend/historical and benchmark
analysis /5 – All categories of ratios employed as explained in project description /3 FIN 311 Intermediate Finance
Spring 2019
Financial Analyst Report
Project Description
Dr. Nataliya Zaiats
This project is divided into two components. First, you will produce a typewritten team report (10-15
double-spaced pages (excluding charts), proofread for spelling and grammatical errors) summarizing
all your work. Second, you will present your project in class, that is, you must prepare a 10-minute
PowerPoint team presentation of your work.
Purpose of the Project:
? Learn how to perform firm analysis and valuation
? Apply material learned in class to the real world data and obtain exposure to challenges faced
when performing firm analysis and valuation
? Become familiar with sources of finance and economic data
? Strengthen team-work skills by working on the project in groups
? Enhance presentation skills by presenting the project in class
Find a Team:
You MUST work on this project in a group of three to four students. You are asked to work in teams
for few reasons. First, this will enable you to enhance your teamwork and leadership skills. Second,
you will have an opportunity to learn from your fellow students.
Choose a Company:
Each group must choose a
? non-financial company that is
? publicly traded
? has a stock price of greater than $5 and
? has been traded for at least 4 years and
? has paid dividends for the past 5 years and continues to pay dividends
Please note that failure to choose the right company will be penalized.1
The following companies CAN NOT BE CHOSEN: Coca-Cola. PepsiCo, Target, Harley-Davidson.
1
It is important to follow these guidelines. If you choose a company that does not satisfy one or more of
the criteria, you might not be able to perform all the necessary analyses and therefore will not be able to
get the best possible grade.
1
Please also note that if you have worked on “Company Valuation Project” in FIN 200, you may not
choose the same firm.
General Project Rules:
? Project has to include an executive summary highlighting main results and the table of contents.
? You are expected to meet professional presentation standards – expect to be severely penalized for
grammatical and spelling errors.
? Use bullets and numbers to highlight important points.
? Use as much visual aid as you can (pie charts, tables, diagrams).
? Tables should be properly referenced in the text. Tables should appear in the body of the report
rather than in appendix.
? Number pages.
? Using material from outside sources is acceptable only if the source is cited properly. Use
footnotes for citations rather than endnotes.
? Plagiarism is unacceptable.
? Subcontracting is unacceptable.
Project Description:
You will apply skills learned in this class to evaluate company’s performance and price its securities.
You must make a recommendation: buy, hold or sell and clearly justify it. Your report (written
deliverable) and presentation (oral deliverable) must be clearly articulated. Every statement you
make must have a purpose. Mere description of facts and numbers will receive very little credit.
When working on this project, you should synthesize all material on valuation learned in this class
and apply it in a comprehensive manner to your analysis.
At the minimum, your report should include:
? In-depth description of the firm, its competitors and the industry
o This section of your report has to provide the reader with a clear understanding of
competitive advantage of your company, opportunities and challenges facing the
company and the industry. Material in this section should be used to estimate the
growth rate of the firm. You should be able to draw on other finance and business
classes taken at Suffolk when preparing this section.
o After completing this section you must identify main value drivers of the firm.
? Financial statement analysis of the firm using ratios
o When working on this section, remember that the purpose is to analyze the firm and
its financial position, not simply to calculate ratios. It is essential to make it clear in
your report and presentation what calculated ratios tell you about the company and
how you used this information in valuation.
o You are required to perform both (i) trend/historical and (ii) benchmark analysis. You
have to justify your choice of benchmark. For trend analysis, use at least three most
recent years of reported data.
? Analysis of firm riskiness
o What are the sources of risk of the firm (market, industry, firm, currency, etc)? How
can you tell? Has the risk been changing overtime? How can you use this information
to perform valuation?
o You are required to calculate your own beta for the firm
2
Remember that the main goal of the project is to VALUE THE FIRM using two (2) key
valuation methods. Therefore, the first three sections of the report have to be geared towards
finding the inputs into valuation formulas and identifying the main value drivers and risks.
?
Firm valuation
o You have to value the stock using the following methods:
1. 2-stage Discount Dividend Model (DDM) *
2. Valuation using multiples (P/E ratio) **
o A well executed project will clearly explain all assumptions made and the sources for
all parameters. If you need to estimate parameters, clearly state your reasoning behind
the choice of each method of estimation.
o A well executed project will try different alternative estimates of parameters and
discuss the sensitivity of the stock price valuation to assumptions about different
parameters.
o Note that this is the central part of the project.
* DDM Model:
–
Please use information on valuation of Harley Davidson (in PPT slides) for your
guidance.
To value the firm using the DDM model, you will need to estimate/obtain the following
parameters: D1, r, and g. Your D1 will be the expected divined per share for 2019. You can
use your firm’s financial statements to analyze its dividends over the past several years and
use its current dividends (paid out in 2018) to compute 2019 expected dividend. Remember,
D1 = Do * (1+g). You will need your g calculated in order to obtain D1.
You will compute your r from CAPM equation (please use information from the file
CAPM+CompanyValuation.ppt posted on Blackboard in folder “Financial Analyst Report”).
o Your g estimate will not be a result of a precise calculation, but rather, your best
estimate given your thorough analysis of both quantitative and qualitative
information.
? You will pull up the analyst reports to assess what growth rates different
agencies are predicting.
? Your will read extensively to assess if your company appears to be a high
growth or a low growth firm. Is it launching a new product some time soon?
What are the growth prospects for your firm? And so forth.
? You will look at historical dividends for several years and compute
retrospective annual growth rates for your firm by using the formula D1 = Do
* (1+g) and solving for g.
? You can also compute g from the following formula: g = ROE * plowback
ratio.
? Finally, you will assess the differing levels of growth rates that you obtained
by the above means, and decide on the growth rate to use in your DDM
formula.
? Remember that DDM formula assumes a constant g – the growth rate
that will be valid forever. Be careful not to over/underestimate your
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growth rate. That is, if your firm is in the industry that will do well
when the economy is not doing well, you may be tempted to tilt
towards an overestimate, especially since public sources will be
reporting high estimates for the next few years. However, do you
believe that such a high growth rate will persist forever? Be careful
with your choice.
** Valuation using multiples (P/E ratio): Please use information for relative valuation from
respective PPT slides for guidance.
Please note that your final estimate of the stock price should be the weighted average of
the stock prices obtained from DDM and valuation using multiples.
You must justify your choice of weights.
?
Conclusion and recommendation
o Your project should conclude with your recommendation, as to whether the firm is a
good investment (is the firm undervalued, fairly valued or overvalued).
Keep in mind that the purpose of the project is to value the company. A common mistake made
by students is to spend too much time describing the company and its position and to spend
very little time on valuation.
To be a good analyst, you must be able to differentiate between a good story and a good stock.
You might be analyzing a wonderful company that does everything right and had a great growth
potential (“good story” company). However, as an analyst you need to determine whether all that
“goodness” of the company is already priced in the market. If it is, then it might not be a good stock
to buy (it is fairly valued or overpriced).
Due Dates:
?
You will be asked to hand in your intermediary results as the course progresses. Your project
progress write-ups are due in class on
o 1) Wed, Feb 6 (In-depth description of the firm, its competitors and the industry; analysis of
firm riskiness – market, industry etc.)
o 2) Mon, Mar 18 (Financial statement analysis; computing Beta; computing cost of equity by
CAPM)
o 3) Mon, Apr 8 (Firm Valuation using DDM)
?
?
?
?
Hard copies of the project final report and presentation are due for all teams on Tue, Apr 16,
in class.
Soft copies of the project final report and presentation are due for all teams by Mon, Apr 15,
midnight. Please email your work to the professor.
Please note only one submission is allowed. Once emailed to the professor / submitted in a
hard copy, your submission is final and no further revisions are allowed. Please do not resend multiple copies.
Presentations will take place on Tue, Apr 16 and Wed, Apr 17.
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RESOURCES GUIDE
Library has a variety of research guides to help students select appropriate databases and other resources,
including Company Research: http://suffolk.libguides.com/companyresearch
The complete list of all guides relating to business can be found on the Sawyer Library homepage, or with
this direct link: http://suffolk.libguides.com/cat.php?cid=20936
Examples of databases are Marketline, Lexis-Nexus, and Hoovers. You can also search in Business
Source Premier for articles on your company and its CEO, finances, developments, products, financial
analysis. Also, OneSource database provides access to research and data on over 5 million companies.
Once you are in OneSource, enter your company name and you will have access to company financials,
annual reports, analyst reports, company news, industry news, SWOT analysis and more. You can also
use OneSource to make custom reports.
GRADING RUBRIC
PRESENTATION – out of 30 points:
–
High standard of professional communication during presentation /4
–
Professional quality of Power Point slides /4
–
All project areas well described, presented, and supported /20
o In-depth description of the firm, its competitors and industry /2
o Financial statement analysis /2
o Risk analysis /2
o Firm Valuation: DDM /2
o Firm Valuation: multiples /2
o Recommendation /2
TOTAL: /30
WRITTEN REPORT – out of 70 points:
In-depth description of the firm, its competitors and the industry
– Competitive advantage of your firm well articulated
/6
– Opportunities and challenges of your firm well articulated /6
– Key value drivers thoroughly evaluated /5
Financial statement analysis
– Firm and its financial position is thoroughly analyzed using trend/historical and benchmark
analysis /5
– All categories of ratios employed as explained in project description /3
Analysis of riskiness
– Sources of risk clearly and thoroughly evaluated (firm, industry, market) /5
5
–
Process of Beta estimation clearly explained /3
Firm Valuation by 2 methods (2-stage DDM and relative valuation using multiples) and
Recommendation (key part of the project)
– Assumptions for all parameters well explained for each model /10
– Estimation of all parameters well explained and carried out for each model /10
– Recommendation clearly stated and supported with findings /10
Other
– Report well proofread, edited, and serves as a representative sample of professional writing /4
– Executive summary well-written and a concise summary of all work /3
TOTAL: /70
GRAND TOTAL: /100
(%)
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