integrate your knowledge of financial analysis and valuation concepts, and your ability to access relevant information about a specific industry and company on the internet. You will choose a publicly-traded company (Tesla) in which you have interest as an investor. Pending more specific details and resources, here are some of the questions you might address in your report:
1. To which industry/sector does this company belong? What are the major issues facing this industry? Is your company a dominant player in the industry?
2. What are the significant events, trends, and risk factors affecting the firm? Be sure to consider the Environmental, Social, and Governance (“ESG”) and sustainability issues demonstrated by this company.
3. Examine the company’s financial ratios for the two most recent years, using the ratios introduced in Chapter 3, and addressing the company’s liquidity, operating efficiency, debt, and profitability. Are there any significant trends or changes in any of the ratios? To what do you attribute these trends or changes?
4. Look at the comparative ratios for your company. How do your company’s financials measure up against their main competitors or industry group?
5. Review your company’s statement of cash flows for the past two years. Compare the cash flow from operating activities to the income from continuing operations. By how much do they differ, and why do they differ?
6. What is the credit rating on the company’s debt? Does the company pay dividends on its shares and/or return capital to investors through a share repurchase program?
7. Compare your company’s required return based on the Security Market Line with the expected return based on the analysts’ mean target price and expected dividends. Do you expect the company to deliver value for an investor over the next year? Longer-term?
1. To which industry/sector does this company belong? What are the major issues facing this industry? Is your company a dominant player in the industry?
U.S. Bureau of Labor Statistics. Overview of BLS Statistics by Industry. https://www.bls.gov/bls/industry.htm
Board of Governors of the Federal Reserve System. Industrial Production and Capacity Utilization. https://www.federalreserve.gov/releases/g17/current/default.htm
Check for trade associations specific to the industry as well as current financial news articles (example: https://www.reuters.com/business/ has news for specific industry groups)
2. What are the significant events, trends, and risk factors affecting the firm? Be sure to consider the Environmental, Social, and Governance (“ESG”) and sustainability issues demonstrated by this company.
Annual Reports, Management Discussion & Analysis of Financial Condition and Risk Disclosures.
A list of the Board composition, with independent directors identified, is available at various sites. For example, Reuters describes the Campbell Soup board on the company page under the “People” tab at: https://www.reuters.com/companies/CPB.N . Note proportion of independent directors versus insiders; is the Chairman of the Board independent or is that role filled by the CEO?
Yahoo publishes the Governance Quality Scores calculated by Institutional Shareholders Services (ISS) under the “Profile” tab for the company (scroll all the way down to the bottom). Scores are provided for the following risks: Audit, Board, Shareholder Rights, and Compensation.
Yahoo also publishes the overall ESG ratings provided by Sustainalytics as well as the separate ratings for E, S and G, under the “Sustainability” tab for the company.
3. Examine the company’s financial ratios for the two most recent years, using the ratios introduced in Chapter 3, and addressing the company’s liquidity, operating efficiency, debt, and profitability. Are there significant trends or changes in any of the ratios? To what do you attribute these trends or changes?
The following sites provide a trend analysis of popular ratios: https://stockanalysis.com/stocks/ (Search for company or symbol, then click on Financials/Ratios); https://www.macroaxis.com/
4. Look at the comparative ratios for your company. How do your company’s financials measure up against their main competitors or industry group?
The following site compares many popular ratios for the company and its industry: https://www.investing.com/equities/ (use search window for company page, then click on Financials/ratios tabs)
For the comparative ratios, focus on the Return on Equity and break it down as in the Dupont analysis (Chapter 3). Use the ROE and the dividend payout ratio to estimate the company’s sustainable rate of growth. If possible, compare with a peer company or the industry.
5. Review your company’s statement of cash flows for the past two years. Compare the cash flow from operating activities to the income from continuing operations. By how much do they differ, and why do they differ?
The SCF should reveal the company’s major resource decisions – are they investing in productive assets, are they paying dividends, are operating cash flows sufficient to cover these needs, or is external financing necessary?
6. What is the credit rating on the company’s debt? Does the company pay dividends on its shares and/or return capital to investors through a share repurchase program?
Best source for credit ratings and yields on company’s outstanding bonds is the FINRA/Morningstar site: https://finra-markets.morningstar.com/BondCenter/Default.jsp. This will lead you to the cost of debt for the company.
If the company pays dividends, you can estimate the cost of equity using the dividend discount model (and applying the growth rate you calculated in #4 above). Whether or not the company pays dividends, you can use the CAPM/SML formula to estimate the cost of equity/required return.
Knowledge of financial analysis and valuation concepts
Tesla, Inc., formerly (2003-17) Tesla Motors, American manufacturer of electric automobiles, solar panels, and batteries for cars and home power storage. Founded in 2003 and headquartered in California, Tesla ranked as the most valuable automotive brand worldwide in 2021 and within the leading fifteen most valuable brands actor all industries worldwide. Tesla is one of the world`s most valuable companies and remains the most valuable automaker in the world. The company`s segments include automotive, and energy generation and storage. Notable risks include Tesla cars being too expensive with tax breaks and that the construction of its Gigafactory (battery factory) taking longer than expected. More broadly speaking, Tesla faces a competitive environment from both legacy automakers and other EV manufacturers.
dings also prioritises creating competition between businesses. The Heirs Holdings company is proving the world that Nigeria is leading example in long term investment and promoting entrepreneurship. Nigeria has created many economic partnerships with other nations. The creation of these partnerships have seen Nigerian exports skyrocket. Nigeria also has a young and growing population which is ready for the industrialisation of the West African nation. Less dependence on exporting raw materials and a growing service sector has seen Nigeria’s GDP grow at a faster rate. A good example would be the opening of Nigeria’s first fruit juice concentrate plant Teragro Commodities Limited. The fruit juice plant has contributed to making fruit juice which can be exported. Prior to its construction Nigeria had heavily depended on just exporting raw fruits of which they could not charge much for as these are primary commodities. The fruit juice plant has also sticks by the goals of Africapitalism which are to create long term investment and social wealth. So far, the company is reaching these goals and have also considered focussing job creation, creating local demand, ensuring farmers get a fair pay and helping alleviate food insecurity. The goals of Africapitalism can be found on the Africapitalism Institute website.
The effects of Africapitalism on the banking sector
The banking sector of Nigeria has seen vast improvements with the deployment of Africapitalist concepts. The United Bank for Africa (UBA), is one of Africa’s largest and most successful banking institutes that was created in 1949. In the year of 2005, UBA merged with a struggling bank called Standard Trust bank. The Standard Trust Bank had been facing rough times since 1997, going into bankruptcy, facing charges over corruption and so on. The two banks merged with a mission of democratizing Nigeria’s banking sector. The first few years were a hassle to get the bank up and running as the public were skeptical on whether they could trust the bank or not given its previous history. Around 2010, the bank was formed into a Pan African institute and saw a large increase of customers and ATMs nationwide. The board members promised to deliver and they did, to date the UBA has more than 8 million global customers and has opened branches in the likes of Paris. After the realisation of Africapitalism’s impact on United Bank for Africa, more and more banks have become locally empowered. This change in Nigeria’s banking sector has seen an increase in international finance between African countries. Other banks that have seen tremendous growth in Nigeria are the First Bank of Nigeria, Access Bank and Zenith Bank. All these banks have very aggressive marketing strategies and have been a