Bloomberg Relative Value Analysis

Bloomberg Relative Value Analysis

Instructions/Descriptions

Bloomberg Relative Value Analysis

FINA 4326

Information Literacy Project

This project is designed to 1) familiarize students with much of the data available to investors for analyzing companies primarily through the use of the Bloomberg Professional terminal and Value Line; and 2) provide hands-on experience applying investment finance theory and models to real firms. In the process, students will:

1. a) examine the history of a firm and its industry
2. b) analyze the risk and return of the firm
3. c) conduct a relative value analysis
4. d) analyze insider and institutional ownership
5. e) analyze the firm’s earning history relative to estimates and analysts’ recommendations

Grading: Your work is expected to be thoroughly researched, well written and organized, and presented in a professional manner. Spelling and grammatical errors are unacceptable. Use tables and figures to summarize your findings. Be sure that all exhibits you include are discussed in the text, but added in an appendix at the end of the document. Be careful to reference completely all the resources that you use with the APA 6th edition citation examples provided by the Business Library as guides. Complete and creative projects will earn higher than average evaluation.

Format for report

1. History and Industry Description
2. Provide a brief history of the firm over the past ten years, including the firm’s primary industry of operation, its major competitors (at least 2), and any major acquisitions, restructurings, or other newsworthy events that have occurred recently. Briefly describe the characteristics of the industry. For example, is the industry growing quickly? How competitive is the industry? How easily can others enter the industry? What challenges do you expect the company to face in the future?
3. Sources: Business Insights: Global (history, news, industry)

Company annual reports, 10K reports (some years available on company website; 10+ years in Mergent Online as well as competitors and industry)

Value Line (competitors, news, industry)

Bloomberg Company Description and News (DES, CN)

1. Due date: March 27 (hard copy only, in class)
2. Risk Analysis and Return
3. Go to Bloomberg Beta (BETA) and find the raw Beta and adjusted Beta. Why are the two betas different? Compare your estimate to Yahoo’s estimate of beta. Why are betas different? Include screen shot in the report.
4. Use Bloomberg Total Return Analysis (TRA) to determine your firm’s return over the last five years. How much of the return over the period is attributable to dividends? To price appreciation? Include screen shot in the report.
5. Sources: finance.yahoo.com

Bloomberg Beta (BETA, go to <Help> Definitions)

Bloomberg Total Return Analysis (TRA)

1. Due Date: March 27 (hard copy only, in class)

III. Relative Value Analysis

1. Compare the valuation multiples for your company to those of the major competitors you identified in Part I of the assignment. Reference the list of appropriate metrics for your company in the appendix. Compare Bloomberg and Value Line and discuss reasons for any differences. Does the company appear to be undervalued or overvalued relative to these comps?
2. Sources : Bloomberg Relative Value Analysis (RV). Include screen shot in the report.

Value Line (peers and valuation for each company separately)

1. Due Date: April 17 (hard copy only, in class)
2. Ownership Analysis
3. Go to Bloomberg Ownership (OWN) and Value Line Insider Transactions. Examine insider transactions over the last 6 months. What percent of the shares do insiders own? In the past six months have insiders been buying or selling shares? Next examine institutional ownership. What percent of the shares are owned by institutions? What type of funds own the stock?
4. Examine the short interest over the last year using Bloomberg’s Short Interest (SI) function. What is the current short interest ratio? What percent of the float has been shorted? Has short interest increased or decreased over the past year? Is there a relationship between short interest and the price of the shares?
5. Sources: Bloomberg Ownership (OWN). Include screen shot in the report.

Value Line (insider transactions, institutional ownership)

Bloomberg Short Interest (SI). Include screen shot in the report.

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1. Due Date: April 17 (hard copy only, in class)
2. Earnings and Analyst Recommendations
3. Go to Bloomberg Earnings History (ERN) and compare reported earnings with estimated earnings over the past 10 quarters. Have earnings surprises been consistently positive, consistently negative, or mixed?
4. Go to Bloomberg Analyst Recommendation (ANR) and examine the number and percentage of buy, sell and hold recommendations. Would you consider the analyst community to be bullish or bearish on the company? Use the bar chart on the page to determine if analysts’ sentiments have changed over the last year. Based on the 12-month price target listed, what is the anticipated price appreciation over the next 12 months? Does the forecasted appreciation appear to be consistent with the ratio of buy, sell, and hold recommendations?
5. Read the most recent three Value Line Commentary sections. Discuss changes in sentiment over time and how they compare to the Bloomberg findings.
6. Sources : Bloomberg Earnings Estimates (ERN). Include screen shot in the report.

Bloomberg Analyst Recommendation (ANR). Include screen shot in the report.

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Value Line (commentary)

1. Due Date: April 17 (hard copy only, in class)

Bloomberg Relative Value Analysis

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