Learning Goals: The purpose of this assignment is for you to apply what you are learning in
class in the analysis and valuation of a company’s equity securities. Specifically,
 Develop an outlook for the global economy to inform an industry and company
analysis using economic data;
 Apply the Porter framework and ratio analysis to analyze an industry;
 Discuss ESG factors for your company;
 Determine whether the company is fairly valued based on financial, discounted cash
flow, and P/E analysis, and recommend whether or not to purchase the company’s
 Synthesize the course material into an analysis of a company and integrate the
quantitative and writing elements of the course into a concise report.
 Present supporting data effectively using tables.
Instructions and Description:
 Choose a non-US company (headquartered outside of the US) but is list on a major US
stock exchange. You will be doing your analysis on this non-US company as a potential
investment for a US-based investor. Other selection requirements are listed here.
Company Selection guidelines:
o Non-US company currently listed on a major US stock exchange
o Company must have been publicly traded for at least the last 3 years
o Company must be a current dividend payer
o Company must have declared a positive profit for at least 1 year out of the last 3
 Assume you are doing your analysis on the day the company released its last annual
financial statements (probably either June 30, 2021 or December 31, 2021). Your
forecast will be for one year after the date of last annual financial statements.
 Write the paper from the point of view of a junior equity analyst presenting a valuation to
your boss.
 Do not include definitions of financial terms such as beta, return on equity, etc.
 The tables and graphs should be neat and integrated into the report. They should only
include data that you reference (don’t just copy a whole table of industry ratios and paste
it in).
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 Look at a “real” equity report for guidance on the format, style of writing, etc. Samples
from past CFA Research Challenge Winners:
 Your case study should be 8-10 pages in total length of text (double-spaced), plus the
tables, graphs, and financial statements.
 Attach up to 5 years (at least 3 years) of Balance Sheet and Income Statement data at the
end of your paper as an appendix (be sure to cite the source of this and all data you
obtain). You should format it nicely so that your boss can read it easily and it looks
integrated into the paper.
 Cite all sources using footnotes. Include a bibliography. Use the APA style (NOT MLA
List of Works Cited)
 The paper must include all the elements below to earn full credit. Partial submissions
(just the industry analysis, e.g.) will not be graded and will receive a grade of F.
Required Elements of the Paper
Cover Page (Executive Summary):
 The Cover Page will be an Executive Summary of your company and recommendation
(whether you think the stock is a buy or sell, and why). A template will be provided to
you. (Note: As you are constructing your report, you will complete this section last.)
Introduction, Economic Environment, and Industry Dynamics (1-2 pages):
 Write an introduction to the paper. Describe the company, its primary business(es),
current strategy, and its industry/competitors (1 paragraph).
 Select at least 5 economic indicators relevant to your company, its industry, and its
headquarters nation.
o Graph the past 10 years of this economic data. Make sure the units are
appropriate and the graphs make sense (e.g., Year-on-year % changes, not
absolute $ amounts, graphs are labeled, etc.).
 Discuss the selected indicators and your outlook for the global economy.
 Relate the impact of this particular sector of the economy (producer prices, industrial
production, consumer spending, etc.) on your company and its industry.
 Describe your company’s industry and industry forecast.
 Select and justify the major competitors (at least 3 competitors) you are going to use to
compare with your company (e.g., based on size, similar product lines, etc.).
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 Discuss the current state of the industry and your company’s position in the industry
using the Porter framework (presented in the class slides and in the article “The Five
Competitive Forces That Shape Strategy”).
o Include a table, graph, etc. to support your industry analysis. You may integrate
the industry graph(s) with the economic indicator graph(s) if it is appropriate
(industry sales vs. Disposable Personal Income, e.g.). You must have at least one
illustration (table, graph, etc.) to support this analysis. Do not include anything
that you do not refer to in the paper.
 Describe your company’s position related to ESG factors.
o How does the company address Environmental impact such as Climate Change
and Sustainability?
o How does the company address Social concerns such as Diversity, Human Rights,
Consumer Protection, and Animal Welfare?
o How does the company address Governance concerns such as Management
Structure, Employee Relations, Executive Compensation, and Employee
Financial Analysis (1 page):
 Analyze your company’s financial ratios (cite source of ratios). Discuss the most
important aspects of your company’s liquidity, activity, leverage, and profitability (not
every single ratio listed, just the highlights). Explain what you think caused any big
changes in ratios over time, or big differences versus the competitor group. Relate the
financial performance to current strategies, M&A activity, and/or industry dynamics.
 Use the DuPont model to analyze ROE and ROA.
o Use the past 5 years of company ratios, and the latest year for the Competitor
P/E & Growth Rate Analysis (1-2 paragraphs):
 Analyze the P/Es for your company and its competitors based on the fundamental data.
 Discuss the market’s expectation of the company’s future growth rate derived from the
fundamental value of the P/E, compared to historical growth rates. Compare with the
sustainable growth rate from DuPont.
 State whether you think these assumptions are realistic given the company’s financial
history and strategy.
Financial Forecast (1 page):
 Create a financial forecast (Income Statement) for your company for the next year fiscal
year. Explain your assumptions for each element of the forecast in the context of the
company’s strategy and competitive position.
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 Use the forecast to find a target stock price for one year from now using the P/E method.
o Use three different P/Es: 1) the P/E for your company for last year; 2) the
forecasted P/E for your company (cite source); and the P/E for the competitor
group for last year. Explain which P/E assumption makes the most sense for your
company, or why you would use an average of some or all of the three
 Compute an expected return for next year and a valuation for the stock today, based on
the projected stock price and projected dividends.
 Obtain the beta for your company from a financial website (cite source). Calculate the
required return of your company using the Capital Asset Pricing Model (Use can use the
long-term reference points for the risk-free rate and market risk premium
(Rf = 3%; MRP = 10%).
 State whether the feel stock is overvalued or undervalued or priced correctly from this
Discounted Cash Flow Valuation (1 page):
 Value your company using the 2-stage dividend growth model.
o Justify your choice of growth rates.
 Discuss the results. State whether the stock is overvalued or undervalued.
Conclusions (2-3 paragraphs):
 Compare your valuations from the:
1. Financial Forecast with P/E Method
2. Discounted Cash Flow Model (i.e., 2-stage dividend model)
 Discuss the strengths and weaknesses of the different assumptions you used.
 Explain and justify whether or not you would invest in the company. Choose a BUY,
SELL, or HOLD recommendation.