EQUITY RESEARCH (Sumedha Tuteja ma’am)
How external factors affect stock market, internal factors, SWOT analysis of the company etc.
We arrive at the intrinsic value i.e. the ideal value of the share.
Various methods to find intrinsic value:
- Forecasting cash flows, costs etc.
- Estimate value of asset/ compare to other peers/ ratio analysis (happens when there is need for breaking of growing concern assumption).
Using these approaches, we arrive at a value estimate.
Ve = estimated value of share (what the analyst forecasts the price to be)
P = current market price (what the price is)
V = actual price of share (what the price should be)
(Ve – V) = the error the analyst is making
Ppt - Van home and Wachowicz, Fundamentals of Financial Management, 13th edition Pearson 2009 by Gregory Kuhlemeyer.
Top-down approach is the EIC approach.
Economic – relating to the company
Industry – sector specific factors; how the overall sector is behaving
EIC approach and CIE approach
EIC – identifying sectors and then identify profitable companies (top-down approach)
CIE – using a screener (filter) select a company and find the critical success factors (CSF) and the risk factors for the company to do well. After this, scan the EIC.
Market price > Value assumed à sell
Market price < Value assumed à Buy
Investor presentation and annual reports – EIC
Video(3) downloaded… check EIC ppt etc.
Go to website of your company chosen. Go to investor section and download annual reports (5 years from FY-ending 2016 to 2020)
Data from 18-19 will be present in annual report of 19-20 so download alternate years to get all data.
Finology.in – ticker plus
Quiz and test – Quiz 2nd class after next class. Test on next class after 9th Dec
Equity asset valuation book (CFA)
- Chapter 1
- Chapter 2
- Chapter 3
- Chapter 4
Equity risk premium = Rm - Rf
Can you see Gordon’s growth model in the Harvard case study (Disney) ?
Or GDP growth rate
Dividend payout ratio = dividend per share (DPS) / earning per share (EPS)
Retention ratio (b) = 1 – Dividend payout ratio
CHP 4: TECHNICAL ANALYSIS
CHARTS AND TREND INDICATORS
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