• Industry and Firm Analysis: Nature of the industry which your company belongs to.
Focus on things such as the regulations, seasonality, supply and demand patterns, need
for labor and technology and any special needs that might force the company to
accumulate any specific assets/liabilities.
• Management and Governance: Ownership and control, board structure and firm’s
interactions with the markets (Some of the data needed for this analysis can be obtained
from the proxy reports via Edgar: Look up for form DEF 14A)
• Evaluation: Cash Flows, growth pattern, any special projects that company is heavily
dependent upon.
• Risk and Return: What is the risk profile of your company? (How much overall risk is
there in this firm? Where is this risk coming from (market, firm, industry or currency)?
How is the risk profile changing? What is the performance profile of an investment in
this company? What return would you have earned investing in this company’s stock?
Would you have under or out-performed the market? How much of the performance can
be attributed to management? How risky is this company’s equity? Why? What is its cost
of equity? How risky is this company’s debt? What is its cost of debt? What is this
company’s current cost of capital?
• Calculation of beta, use CAPM, find required rate of return and compare the expected
returns.
• Diversification strategies: What are some of the diversification strategies that an investor
of the firm can adopt to minimize the investment risk and create a portfolio for optimal
risk-return relationship?
