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Anonymous asked in Business & FinanceInvesting · 1 decade ago

Active / retired Fund Managers and Equity Analysts.......?

Sorry to bug you. I'm a noob.

I need to produce a professional-level (hopefully) buy-side evaluation.

So far I've finished the DCF modeling.

Would this be sufficient?

1. SWOT analysis on the company and it's subsidiaries

2. Ratio analysis

3. Quality of Financial Reporting

4. Vertical and Horizontal analysis of the Statements


What else is commonplace?

Thanks a lot

3 Answers

  • 1 decade ago
    Favorite Answer

    Here are a few things to examine. These are more in the area of the company as a whole. Looking at cash flow and the like is actually the second stage of the analysis. The first stage is to examine the company itself, its competitive setting and it future prospects. After you've determined that the company has a valid product or product portfolio, has reasonable long-term prospects and isn't facing serious problems, then dig into the guts of the company and its cash flow, etc. There are a lot of questions you should be prepared to answer; here are some right off the top of my head.

    What is the outlook for the sector and industry that the company operates in?

    How is the company positioned in its sector and industry?

    What is its main competition?

    If applicable, what is the new product pipeline like? Any blockbuster products in the pipeline or coming off patents?

    How seasonal is the company -- Christmas, summer, etc.

    What cost pressures are likely to bear on the company?

    Where does it operate? Locally? Regionally? Nationally? Globally?

    How vulnerable is the company to energy price rises? Airlines vs Google, for example.

    How stable has management been?

    Does the company rely on government contracts?

    What is its product mix?

    What is its customer base?

    How does the company compare with other companies in the same business? Size, market share, profitability, new product development, etc.

    What has been the relative growth of the sector and the companies in the sector? How does this company compare?

  • Anonymous
    1 decade ago

    I think you're digging into the right issues. Assuming you've done as thorough a job on due diligence as you can (I'm not sure how much access you have to the company), there are a few other areas I would highlight:

    Exit Strategy:

    Is this a public company? If not, is an IPO exit a possibility?

    If this is a private company, who might be strategic buyers for this company when you're ready to exit?

    Pricing Analysis:

    A DCF analysis is good for determining the upper limit of the pricing you might be willing to pay for a company, but you should also perform a comparable companies analysis and precedent transactions analysis, because these will give you a valuation that will be closer to what the company will actually sell for. The gap between the DCF and the other two valuations will give you a sense of the value (or lack of value) to the investor.

    If you put the range of valuations onto a football chart, it's a very nice illustration to drop into your evaluation. This type of chart is something you'd typically see in a fairness opinion on an M&A deal.

    There is an example of a football chart in this comparable companies model:

    Source(s): Investment Banking fairness opinions.
  • 1 decade ago

    A first hand look at the company and talking

    with management and workers.

    Is the store that's selling the product doing a

    good business?

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