FINC440- Security Analysis and Valuation

FINC440- Security Analysis and Valuation

Spring 2015

Professor Marcoux



Use these subheadings:

Introduction (Brief – 1/2 page)

Investment Thesis

Overview of the contents of the paper to follow


Overview of Company (Brief – 1/2 page)

History and principal strategic objectives

Primary Financial Ratios related to performance and valuation


Industry Overview and Analysis (Brief – 1/2 page)

Analysis of industry and opportunities for growth

Principal competitors in the industry

Evaluate position of company in the industry and how its competitive position and strategic

plans are likely to affect company and stock values


Financial Analysis for Valuations (3 to 4 pages)

Financial Ratio Analysis [3-5 years of financial performance data]

Historical ratio analysis [ratios related to valuation]

Cross-sectional ratio analysis

Comparisons to comparable company averages w/std deviation

Use tables & figures (graphs) to present valuation data for analysis

Explain what results mean for analysts and investors

Income Valuation by Discounted Cash Flow Model

1. Free cash flow – use Macabus FCF – Equity equation; use or other FCF to Firm and FCF to Equity model (Income Valuation)

Make sure all input variables are justified

Explain what results mean for analysts and investors


Relative Valuation by Market Comparables

Relative valuation – use textbook Valuation by Comparables model or instructor ranking model – show all work and references

Explain what results mean for analysts and investors


Development and Defense of Investment Thesis (1 to 2 pages)

Recommend buy, sell, or hold

Demonstrate critical thinking about recommendation

Present strengths and weaknesses of the recommendation

Assure that recommendation is supported by logic, comparative

analysis and valuations


Summary / Conclusion (1/2 page)

Review principal observations and conclusions

Review final recommendation

No new information is introduced in this section.


Paper includes: 8-10pages of narrative; spreadsheet w/3-5 years of financial data; citations/references for all sources; show all work for calculations; checklist

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