Analyze and discuss the different components of growth (retention rate total asset turnover total assets
Analyze and discuss the different components of growth (retention rate total asset turnover total assets/ equity and profit margin) for your chosen industry and a market index during the most recent 10 years. Based on this analysis how would you expect the growth rate for your industry to compare with the growth rate for the market index? How would this difference in expected growth affect the multiplier?
Do the following for companies outside the retail drugstore industry.
A. Give an example of a growth company and discuss why you identify it as such. Based on its P/E do you think it is a growth stock? Explain.
B. Give an example of a cyclical stock and discuss why you have designated it as such. Is it issued by a cyclical company?
C. Discuss a company that is known to be a low-cost producer in its industry and consider why it is a cost leader. Do the same for a firm known for differentiating.
Select a company outside the retail drugstore industry and:
D. Indicate what economic series you would use for a sales projection. Discuss why this is a relevant series.
E. Based on reading its annual report and other public information discuss what you perceive to be its competitive strategy (i.e. low-cost producer or differentiation).
F. Examine its operating profit margin relative to the operating margin for its industry during the most recent 10- year period. Discuss the annual results in terms of levels and percentage changes.
G. Select two stocks in an industry of your choice in Part 1
i. Perform a common-size income statement analysis over a two-year period.
ii. Discuss which firm is more cost effective.
iii. Discuss the relative year-to-year changes in gross profit margin operating profit margin and net profit margin for each company.
iv. Compute their forward P/E ratios using last year’s average price [(high plus low)/2] and estimated earnings.
v. Compute their growth rate of earnings over the last five years.
vi. Calculate the beta using the daily stock returns over the last three years.
vii. Discuss the relationships among P/ E growth and risk.