Step-by-Step: How To Analyze A Company

Stockmarket. Valuation and Analysis Alexander Gilles, CFA

Part 1 Valuation and Discount Factors

Concerned about valuation Board Management Marketing Production Operations Buyers Suppliers Finance Equity Analyst Credit analyst Strategist Rating agency Stockholders Lenders Equity funds, VC funds, raiders Potential stockholders Potential lenders Bond funds, high-yield (junk) bonds Financial statements Investment bankers

Value of a building ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Value of a business ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Value of a business ,[object Object],[object Object],[object Object],[object Object],[object Object]

Understanding a Company ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Business Product Segments Geographic Segment Key Profit Contributors USP

Raw Material 1 Raw Material 2 Raw Material 3 Manufacturer (Production Processes) Distributor/Wholesaler Retailer Allied Components Allied Services like Transportation; security etc Exclusive Showrooms Intermediaries in Raw Material Procurement Value Chain Analysis ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Value chain’s impact Cost of Raw materials Warehousing Trucking Cost of Goods Sales Other income Workers salaries Selling Gen Admin expenses Tax savings Lower Interest expenses Making money or saving money, from manufacturing process or from any other process. Value

Interpreting News Items/Developments ,[object Object],[object Object],[object Object],[object Object],[object Object],What? Why? How Much?

Part 3 Financial statement analysis

Growth in Prices Growth in Volumes REVENUE GROWTH ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Decline in Prices Decline in Volumes REVENUE DECLINE ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Analysing Revenue Changes: Growth/Decline in Revenues

Cost of Goods Sold (COGS) Selling, General & Admin Expenses (Includes Marketing Expenses) Salaries & Wages Interest Income/Expenses ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Analysing Cost Changes Note: Also check reasons for increase in depreciation & amortisation; unusual expenses and use of deferred tax asset/liability

Understanding the Balance Sheet ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Analysing a Balance Sheet ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Compare Ratios with Peers to get Industry view

Ratios: what they mean for business Solvency Ratios Ratio for measuring operational efficiency Ratio’s for measuring efficient use of capital/assets ,[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object]

Step-by-Step: How To Analyze A Company

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Step-by-Step: How To Analyze A Company