The document outlines a term project for an finance course where students will analyze the performance, value, and make an investment recommendation for a real company. Students will work in sector teams to analyze companies within the same industry. Over the course of the semester, students will post weekly analyses covering topics such as the company, competitors, strategy, profitability, assets, liabilities, equity, cost of capital, valuation, and make a final investment recommendation. The goal is for students to apply what they are learning and develop skills as financial analysts.

1. FIN 370 - Term Project
Overview
During the semester, each class member will serve as an analyst
responsible for analyzing the performance, estimating the
current market value and making an investment recommendation
on one company. To help in this process, you will also serve on
a “sector team” with other class members who are analyzing
similar companies. Each sector team will be composed of five
or six team members. The analysis of each company will be
done in a series of steps with weekly posts on topics paralleling
those we cover in class. Be the end of the semester, you will
have completed a detailed analysis and valuation of a real
company. Finally, each team will make a presentation and lead
a discussion about their firms in a panel discussion attended by
a number of Bryant alumni who work in finance.
Purpose
The purpose of this project is twofold. First, and most
importantly, the project will give you an opportunity to apply
what you are learning in this course and to develop your skills
as a financial analyst. Second, this project will give you the
opportunity to develop a professional work product that may be
useful to you in your job search. To this end, you should view
your weekly additions to the project not just as a step to
meeting the course requirements but as a showcase for your
abilities as a financial analyst.
Sector and Company Selection
Each sector team will select one of the following three sectors
and each team member will select one company from that
sector. We will be using BusinessWeek’s sector rosters to make
these choices and the links to these sectors are shown below.
Shown below are a series of additional criteria to use in
selecting your company. Attached is a form that you should use
in submitting your company selections for approval.
Requirements (your choice must meet these criteria):

2. 1.
Your company must come from one of these three sectors and
should be in the same subsector as the rest of you sector team.
·
Consumer Discretionary Sector
http://investing.businessweek.com/research/sectorandindustry/se
ctors/sectordetail.asp?code=25
·
Consumer Staples Sector
http://investing.businessweek.com/research/sectorandindustry/se
ctors/sectordetail.asp?code=30
·
Technology Sector
http://investing.businessweek.com/research/sectorandindustry/se
ctors/sectordetail.asp?code=45
For example, if you click on the Consumer Discretionary Sector
link above, you will be taken to a screen that lists 17
subsectors. The first subsector is “Textiles, Apparel and
Luxury Goods” and it contains 38 companies. The next
subsector, “Specialty Retail” contains 106 companies. Your
team should select a sector (one of the three above) and then a
subsector with each team member selecting a different company
from that subsector. This way, you will reduce your work load
by being able to share comparable data with your teammates.
2.
You may not choose a company that has been analyzed in FIN
370 during the last two years. A list of these companies is on
the course Blackboard site under the “project” link.
3.
You may not choose a company that is being analyzed during

3. this semester in this course (e.g., DKS or a company from one
of the cases).
4.
Your company must have at least five years of available
financial statements and 10k reports. You can verify this by
looking at the company’s investor relations web site or by
searching for the company on the U.S. Securities and Exchange
Commission’s EDGAR site at
http://www.sec.gov/edgar/searchedgar/companysearch.html
(Hint: Search using the ticker symbol, not the company’s
name).
5.
Your company must have at least three publicly-traded
competitors each with five years of available financial
statements.
Other Guidelines for Company Selection (carefully checking for
these criteria will make your life a lot easier over this
semester):
1.
Look for companies that are engaged in a single business.
Companies that are engaged in multiple businesses will require
you to do much more work as you will have to analyze each
business individually and then combine the results to measure
the overall performance and value of the company.
2.
Avoid companies that have had significant acquisitions or
divestitures during the last five years. The presence of these
transactions will skew your financial results and add to your
work load. There are two ways to check for this. First, you
should read the first section of your firm’s 10k report for each
of the past five years. Major transactions will typically be
disclosed there. Second, look at the firm’s total assets in each

4. of the past five years. Firms without major acquisitions or
divestures will show a fairly smooth pattern of growth in
assets. If you find a unusual increase or decrease in total
assets, look for the reason.
3.
Coordinate with your sector team and pick companies that
operate in the same subsector. For example, your team might
choose to pick companies from the 106 specialty retailers listed
in the Consumer Discretionary Sector. Picking a group of firms
that are competitors in the same subsector will allow you to
share information and specialize.
Project Guidelines
The FIN 370 course syllabus includes a course plan that details
both in-class and project activities and due dates. The course is
designed so that we will be covering each step of the analysis a
few days before you are responsible for updating your project.
You are expected to have posted your completed analysis for
each segment by the end of the day (i.e., midnight) on the due
date. Late or missed additions will result in grade penalties.
While much of the analysis focuses on the individual
companies, your sector team is intended to be a resource for
you. You should meet regularly with your sector team and you
may use team mates for editorial support. That is, while you
are expected to analyze your own company, you may review
each other’s postings to help correct for errors or omissions.
Each analyst’s report should include a summary posting with a
listing of all of the companies and a brief overview of the
performance of the group of companies. Each sector team will
also work together to prepare for the Sector Panel Presentations
at the end of the semester. The grade portion of the project
related to the sector team will include a peer evaluation at the
end of the semester.
Shown below are guidelines for each update that you will post
to your company analysis. You should regard these guidelines
as

5. minimum requirements
. The best analyses will go beyond these guidelines. Feel free
to post additional material that would help an investor decide
whether to buy or sell this stock. Be creative! Track your
company throughout the semester. Update your analysis to
include discussions about ongoing news on the firm. Show that
you really understand the firm, its businesses, the industry and
competitors. Go beyond simple quantitative analysis. What do
the numbers tell you? Remember your role; you are an
independent analyst following this stock for the purpose of
making an investment recommendation on the company. Be
objective; don’t get caught up in the company’s marketing hype
and management discussion “spin.”
Post 1
: The Company – Introduce the company and its businesses.
Post 2
: Competitors – Determining which companies are most
comparable to the subject company is a non-trivial exercise.
Look at the companies that operate in the same industry
segment as your company. How are they similar and how are
they different? Are they comparable in size? How do their
strategies compare? Do they serve similar market segments and
geographic areas? Do these companies also operate in other
businesses that may affect comparisons with your company?
Post 3
: Strategic Analysis – What is the company’s strategy and how
does it compare to that of its competitors? What is the
company’s source of competitive advantage? Do an
environmental scan and/or a SWOT analysis. Consider the
industry and what it takes to succeed. Consider Porter’s five
forces. Look into the future. How is the business and industry
changing? Are there any disruptive innovations looming?
Post 4
: Profitability Analysis – Examine the firm’s profitability over
the past five years in comparison to its overall industry and to
your selected competitors. Look at multiple metrics for

6. profitability including gross profit margin, net profit margin,
return on assets, return on equity and return on net operating
assets. Use the DuPont equation to disaggregate the firms’ ROE
and explain changes in the firms’ ROE over the past five years.
Post 5
: Revenue Recognition and Operating Income – How does your
firm recognize revenue and how does your firm’s revenue
recognition policies compare to its competitors? Is there any
evidence of aggressive revenue recognition? Consider the
firm’s operating income and how it has been affected by “above
the line” items including research and development expenses,
restructuring costs, income taxes and foreign currency
translation. Consider “below the line” components to income
including discontinued operations and extraordinary items.
Examine earnings per share and the impact of dilution from new
shares (and potential new shares) and the anti-dilution effects of
share buy-backs. Finally, consider the “quality of earnings” of
your firm.
Post 6
: Assets and Working Capital – Examine each of the major
assets and working capital accounts. How does your firm
account for each of these items and does the accounting method
differ from the firm’s competitors. Examine the firm’s
receivables. Is there any evidence of aggressive revenue
recognition or earnings management through manipulation of
the allowance for doubtful accounts? Examine the firm’s
inventory methods and policies and compare to their
competition. If the firm uses a different inventory accounting
method (e.g., FIFO versus LIFO) than its competitors, calculate
the impact on net earnings. Is there any evidence of excess or
obsolete inventory? Examine the firm’s accounts payable. Is
the firm paying within a reasonable time? How does this
compare to the firm’s competition? Calculate asset management
/ efficiency ratios for the past five years for your company and
its selected competitors including A/R turnover in days,
Inventory turnover in days, A/P turnover in days, the cash

7. collection cycle in days. Calculate and interpret liquidity ratios
including the current ratio, quick ratio and cash ratio. Examine
the firm’s fixed assets and related accounting policies including
depreciation period and method. Examine the firm’s intangible
assets. Look at the footnotes for evidence of impairments.
Post 7
: Liabilities and Off-Balance Sheet Financing – Examine the
firm’s use of leverage and compare its use of leverage with its
competitors. Compute leverage ratios and coverage ratios.
Make a judgment about the firm’s financial risk compared to its
competition. Does the firm utilize off-balance sheet financing?
If so, estimate the value of this off-balance sheet financing and
prepare a revised balance sheet recognizing this debt. Calculate
the impact of this off-balance sheet debt on the leverage ratios
and on your overall assessment of the firm’s financial risk.
Does the firm have any pension obligations? Is any portion of
these obligations unfunded?
Post 8
: Equity Analysis – Examine the firm’s equity in comparison to
its competitors. Does the firm utilize multiple classes of stocks
and, if so, what are the differences in the classes. Examine
stock transactions by insiders and institutional investors? Are
insiders buying or selling stock? Examine the firm’s use of
employee stock options and other stock-based compensation.
Consider the dilutive effect of these transactions on future
earnings per share. Examine the firm’s dividend policy and any
stock dividends and splits over the past five years. Compare the
firm’s stock performance over the past five years with its
competitors and with an appropriate broad market index.
Post 9
: Cost of Capital – Calculate the firm’s weighted average cost
of capital (WACC). Consider the impact of any off-balance
sheet financing in the calculation of the firm’s capital structure
weights. Determine the firm’s cost of debt. What is the most
reasonable proxy if your firm’s debt is not publicly traded?
Estimate the firm’s cost of equity using the DCF, CAPM and

8. Bonds plus risk premium methods.
Post 10
: Free-Cash Flow Valuation – Estimate the value of the firm
using the McKinsey Free Cash Flow model. Be sure to discuss
your key assumptions and sources and justify your growth rates,
key inputs (e.g., COGS percent, SG&A percent, CapEx percent,
etc.) and your choice of time horizon.
Post 11
: Alternate Valuation Models – Estimate the value of your firm
using alternate valuation models including the Residual
Operating Income (ROPI) model and market multiples approach.
Post 12
: Examine your entire project and make a final judgment about
the firm as a potential investment. What do you believe is the
“true value” of the company and its stock? Make an investment
recommendation.
Project evaluation will be based on the following criteria:
1.
Demonstrated understanding of accounting and financial
concepts,
2.
Creativity in the analysis and justification in the
recommendations,
3.
Thoroughness and completeness,
4.
Initiative,
5.
Form (e.g., details such as citing references, grammar,
presentation of the project, Professionalism of graphics, typing
errors, etc.), and

9. 6.
Timeliness.
FIN 370 – Term Project
Sector & Company Selections
Analyst’s Name:
Other Team members:
1.
2.
3.
4.
5.
Sector (check one):
Subsector:
Consumer Discretionary Sector
□
Consumer Staples Sector
□
Technology Sector
□
Company Name:
Company Ticker Symbol:

10. Year of Company’ Initial Public Offering:
Brief description of the company and its business:
Does the company compete in more than one business segment?
If so, list the segments.
Has the firm been involved in significant acquisition or
divestiture activity in the past five years? If so, briefly
describe.
List at least three competitors with five years of available 10k
reports:
1.
2.
3.
4.
5.