英國某大學財務(wù)分析課程

FinancialStatementAnalysisandValuation

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Lecturesandtutorials

-Lecturesprovideaframeworkfororganisingideas.

-Additionalreadingnecessary!

-Ryanaircase:goodpreparationforthecoursework

-Exercises:Foryourownwork

-Tutorials:goodpreparationfortheexam

-Coursework

Nikola.

Thursday,13-14.00

Friday,11.30-12.30

1B14Week12

AFrameworkforFundamentalAnalysis

BusinessAnalysisBusinessactivitiesandcapitalmarketsOperatingactivitiesFinancingactivitiesInvestingactivitiesThefirm:ThevaluegeneratorTheInvestors:TheclaimantsonvalueDebtholdersShareholdersSecondaryDebtholdersSecondaryShareholdersCashfromloansCashfromshareissuesDividendsandcashfromsharerepurchasesInterestandloanpaymentsCashfromsaleofdebtCashfromsaleofsharesTheCapitalMarket:TradingvalueSource:Penman,p.8Whatarewedoing?Financialanalystsare:informationintermediaries;theydigestinformationandprovidesummaryinformationtothepublic/lesssophisticatedinvestors.especiallyimportantwherecapitalmarketsarewelldeveloped.Theyaredoing:Fundamentalanalysis:contextualanalysisofallpubliclyavailableinformationinordertovaluethecompany.Technicalanalysis:spottingsharepricetime-seriespatternsinordertopredictmovementofprices.Whatarewedoing?Partoffundamentalanalysis:Financialstatementanalysisandvaluationofsharessoastogivewellinformedinvestmentadvicetoanequityinvestor.Similartowhatsell-sideequitywithinbrokeragehousesaredoing(asopposedtobuy-sideanalystsaffiliatedwithinstitutionalinvestors)Finalproduct:equityresearchreportNoteofcautioninregardoffinancialstatementanalysis:Financialstatementanalysiscanbedoneforvariouspurposes:creditanalysis,competitivebenchmarking,analysisofmergersandacquisitions,etc.DifferentpurposesrequiredifferentapproachtoanalysisFocusofthiscourse:analysisoffinancialperformanceandfinancialpositioninordertoforecastfuturepayoffstoequityholdersWhyarewedoingit?Socialwelfare:Theactivityofanalystsmakemarketsefficient.Therefore,contributiontoefficientallocationofresources.Personalgains:Ifmarketsarenotefficient,theproperanalysishelpsinidentifyingmispricedcompanies.1980’s:marketefficiencyparadigmwidelyaccepted→passiveinvestmentEvidenceofmarketinefficiency→activeinvestmentandarenewedinterestinfundamentalanalysis(WarrenBuffet)Fundamentalanalysis:anchoringonreliableinformation(accounting)ratherthanrumoursandspeculations;long-termperspectiveasopposedtoshort-termgainDot-combubble:DellillustrationLate1990’s:unlimitedfaithinprospectofnewtechnologyandinternetfirms;bubbleburstin2001Forthey/e2000Dellhadreportedearningsof$1.7billiononsalesof$25.3billion.TheMVofDell’ssharesatthetimewas$146.4billion3*theMVofGMCandFordMotorCompanycombined(P/E8.5/5.0respectively)Dell’ssharestradedataP/Eof87.9!DespitehealthytradingandforecastedgrowthDell’sstockappearedover-valued.In2000thepersharestockpricefellfrom$58inearly2000to$29in2003.Thepricehadonlyrecoveredto$40in2005.Dot-combubble:Whatweretheanalystsdoing?Theywereridingthewave:involvedinshort-termspeculationofthemarketmoodratherthanprovidingmoresoberpicturetotheirclientsbasedonfundamentalsofthecompanies.AnalysisbasedoninternetclicksthatdonotgenerateanyincomeConflictofinterest:Manybrokeragehousesaffiliatedwithinvestmentbanks:thebetterpictureofbusiness,morelucrativebusinessiscreatedforthebanks(SEO’s,mergers,etc.)Dot-combubble:TheroleoffinancialstatementsTheroleofF/Sisto“anchortheinvestorontherisingtideofspeculation”withhardinformationEarningsdidmatter!LossesreportedbyneweconomyfirmsduringthebubbleturnedouttobeagoodpredictoroffailureSurvivingfirmsreportedearningsturnedouttobeabetterindicatoroffutureperformanceMostoftheintangibleassetsdisappearedThemuch-criticisedSoFP(B/S)alsoprovidedgoodforecasts.TheratioofdebtassumedtopursueintangibleswaslargerelativetotangibleassetsandthatratiopredictsimpendingfailureProcessoffundamentalanalysisBusinessanalysisTradingonthevaluationAccountinganalysisFinancialanalysisForecastingValuationUnderstandingthePastProcessoffundamentalanalysisBusinessanalysisEconomicfactorsIndustrystructureCompetitivestrategyCorporatestrategyAccountinganalysisEvaluationoftheextenttowhichafirm’saccountingcapturestheunderlyingbusinessrealityUnderstandingaccountingdistortionsFinancialanalysisAnalysisoffinancialperformanceandfinancialpositionusingratioandcashflowanalysisProcessoffundamentalanalysisForecastingthefutureForecastingofpayoffsthroughforecastsofbalancesheet,incomestatementandcashflowsValuationConvertingforecastintheestimatesofequityvaluebyusingsomeoftheavailablevaluationmodelsTradingonthevaluationInvestmentrecommendation:hold,buyorsellProcessoffundamentalanalysisFinancialStatementsYear1CurrentfinancialstatementsOtherinformationValuationofequityFinancialStatementsYear2FinancialStatementsYear3ForecastsConvertforecaststovaluationValuationValue=PresentvalueoffuturepayoffsDepositaccount,Loan,Bond=PVoffutureinterestreceivable+principalInvestmentproject=PVoffuturenetcashflowsfromtheprojectCalloption=PVoffutureexpecteddifferencebetweensharepriceandstrikepriceHouse=PVoffuturerentsEquity=PVoffuturepayoffstoshareholdersValueofthefirm=Valueofdebt+ValueofequityNote:Valuation≠AssetpricingValuationisaboutcurrentvalueofvariousclassesofassetsAssetpricingisaboutdeterminingreturnstovariousclassesofassetsWhatgeneratesvaluetoshareholders?Valueofthefirm=Valueofdebt+ValueofequityValueoftheoperationsandinvestment=Valueofdebt+ValueofequityMiller-Modigliani:CapitalstructureirrelevanceDividendpayoutirrelevanceInperfectandefficientcapitalmarkets,thevalueisgeneratedonlyinoperatingactivities.BusinessanalysisEconomicenvironmentIndustryFirmEconomicfactorsGDPforecastsMaximumrateatwhichbusinesscangrowinthelongrunInterestratesEffectoncostsofborrowingEffectofCHANGESininterestratesconsumptionvssavingdecision:lowerinterestrates,moreconsumption,highersalesInflationAffectsallocationofcapital(capitalescapestocountrieswithlowerinflationorinvestmentincommoditiesorrealassets)EconomicfactorsForeignexchangeratesImportantforcompaniesexposedtoforeignmarkets(input,outputorinvestment)OilandothercommoditypricesKeyinputstomanybusinessesLookforthecompany’shedging,riskmanagementpoliciesanduseofderivativesBusinesscycleSensitivityofprofitabilitytobusinesscyclevariesacrossindustriesSensitivityofsectorprofitabilitytokeymacroeconomicfactorsIndustryanalysisUnderstandindustryoperationssupply,production,distributionandmarketingprocesses,technology,natureoftheproductEffectofindustrystructureontheprofitabilityPorter’sfiveforcesanalysisIntensityofcompetitiondeterminesthepotentialforcreatingabnormalprofitsWhetherabnormalprofitsarekeptbytheindustryisdeterminedbytherelativebargainingpowerofthefirmsintheindustryandtheircustomersandsuppliersPorter’s5forcesanalysisIndustryprofitabilityBargainingpowerofbuyersThreatofsubstituteproductsThreatofnewentrantsRivalryamongexistingfirmsBargainingpowerofsuppliersDegreeofactualandpotentialcompetitionBargainingpowerininputandoutputmarketsCompetitivestrategyCostleadershipFocus