Assignment:
Investment Analyses
Two Company Wayfair Inc and Overstock.com Inc
They are both public company and their 10-K report attached below
Wayfair: https://www.sec.gov/Archives/edgar/data/1616707/000161670717000133/a2016-12x31form10xk.htm
Overstock:
https://www.sec.gov/Archives/edgar/data/1130713/000113071317000013/ostk-20161231x10k.htm
Please use 10-k as material to answer below questions. Around 5-6 pages.
1. Market Analysis
a. Cross sectional: fundamental analyses
b. Time serial: technical analyses
2. Industry Analysis
a. Cross sectional
b. Time serial
3. Company analysis
a. Cross sectional
i. Profit analyses:
1. Profitability ratios: ROA, ROE, ROCE, EARNINGS/SALES, Cash flow/TA.
2. Activity: inventory turnover, asset turnover
ii. Risk analyses: liquidity w/ cash position, solvency, credit.
iii. Growth analyses: earnings growth, sales growth, assets growth
iv. Select the best:
1. Creating composite indices using results from 3-a-I, ii, iii, & others.
2. Establish selection process:
a. Aggressive approach: consider
i. Growth potential measures first,
ii. Profit measures second
iii. Then, risk measures.
b. Conservative approach: consider
i. risk measure first ,
ii. profit measures second,
iii. Then growth potential measures.
3. Using valuation models.
a. Choose the most under- valued item which has the largest gap between the intrinsic value from the model and the current market value.
b. Methods to find intrinsic values:
i. Present value methods:
1. Cash flow based.
2. Earnings based.
3. Dividend based.
ii. CAPM for expected return: Ri = Rf +βi (E(Rm) - Rf ) +εi
4. Other methods to find under-valued stocks:
a. Using P/E ratios
b. Using BV/MV ratios.
b. Time series: Trend analyses.
i. Growing vs. shrinking in value.