Financial Analysis of AMEX and VISA Stocks using Gordon Growth Model

Running head: FINANCE
Finance
Name of the Student:
Name of the University:
Author’s Note:

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Executive Summary
The aim of the assignment is to conduct a financial analysis on the two banking stocks AMEX
and VISA. The analysis and the valuation of the stock was done in accordance with the usage
and the application of the Gordon Growth Model. The intrinsic value of the stock was compared
with the true market value of the stock and the analyst opinion on the same was given for the
stock. The beta of the stock was calculated using regression analysis and the same was calculated
in order to determine the volatility of the stock with respect to the market index.

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Table of Contents
Introduction......................................................................................................................................4
Discussion........................................................................................................................................4
Beta Analysis...............................................................................................................................4
Required Rate of Return..............................................................................................................5
Gordon Growth Model................................................................................................................6
Comparison of Intrinsic and Market Value of the Shares...........................................................6
Gordon Growth Model Assumptions and Limitations................................................................7
Analyst Opinion...........................................................................................................................7
Discrepancies between Computed and Actual Stock Returns.....................................................7
Capital Market Theory.................................................................................................................8
Diversified Portfolio....................................................................................................................8
Stocks in Diversified Portfolio....................................................................................................9
Systematic Risk and Unsystematic Risk......................................................................................9
Capital Market Line and Security Market Line.........................................................................10
Fundamental Analysis and Technical Analysis.........................................................................10
Expected Return.........................................................................................................................11
Recommendations..........................................................................................................................11
Reference.......................................................................................................................................13
Appendix........................................................................................................................................16

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Appendix 2.....................................................................................................................................17