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Your write-up should address the following questions:
Question 1;
Do you recommend that people buy, hold, or sell the stock? Explain your reasoning.
This part of your report should be a high-level summary of your conclusions from your answers to the next three questions, so write it last.
You should recommend “buy” if the current stock price seems low relative to fundamental value, “sell” if it seems high, and “hold” if it seems about right. There are other ways to justify recommendations, but this is the one I am asking you to use.
Question 2;
What is the firm’s price-earnings ratio? What growth rate and discount rate would you need to justify the ratio in a Gordon Growth Model?
Question 3:
What are the most important growth opportunities that might justify a high or low growth rate? What are the most important risks that might justify a high or low discount rate? In light of those opportunities and risks, does the price-earnings ratio seem reasonable?
Question 4:
Who are the company’s “peers”? How does the firm compare to its peers on various ratios and performance indicators, including the price-earnings ratio? Which are particularly strong or weak? Does a peer comparison suggest that the fundamental value is higher or lower relative to its price?
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