Fundamental Analysis of Stock Template by yru20746


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									                              Assignment 6 – Template

Grading Criteria
                                                                 Total Marks        Your
                                                                     25             Grade
 Print Watch, Invest and Closed portfolio as of close of              5
 market Friday.
 Watch portfolio includes 2 new stocks.
 Invest portfolio accurately accounts for investments to
 Discuss any buys and sells to the Invest portfolio.
 Half page description of 2 stocks outlining what the                 5
 company does.
 Write-up must be in your own words.
 Detailed the source of information for each company and
 why you selected it.
 Calculate the growth rates for four years (three growth              8
 rates) for a company in your portfolio: Sales, Primary
 EPS, Dividend, Operating Cash Flow, Debt, Equity and
 stock price.
 Discuss the company’s products, management and its                   7
 prospects for the future. What are growth expectations in
 the next two years?
 Optional: Discuss stock ownership (institutional and               Bonus
 insider trades) and its ramifications on stock                       5

Changes to portfolios (moving from Watch to Invest or Invest to Close) and
reasons why:
I moved AGN (Botox company) from Watch to Invest as the company has started
to advertise their products through being interviewed by Newsweek magazine or
abc news (I saw those two, but they might have been interviewed more). And then
the stock price started to go up. I think people start to get the information and I
hope the people’s expectation will shift the demand which leads to higher price…

Half Page Description of Company
Create a half page description of any stocks added to your watch portfolio and the reason you
chose the stock. Remember, you should never invest in anything you don't understand and that's
why you need to compile a half page description of the stock explaining what the company is all
about. It's tempting to clip this information from a financial website. Don't do it. The best way to
understand a company is to make sure you can describe it in your own words.
Company 1: Abercrombie & Fitch Co. (ANF)
Abercrombie & Fitch Co. is engaged in the purchase, distribution and sale of
upscale men’s, women’s, and kids’ casual clothes and accessories. A&F operates
more than 500 stores mostly located in the malls, including 153 abercrombie
stores and 43 Hollister Co. stores. (Its kids’ (ages 7-14) store is called
abercrombie, and its teen concept (ages 14-18) is named Hollister Co.) Its
headquarter is located in New Albany, OH and its number of employee is 16700.
The Chairman and CEO is Michael Jeffries.

Information source for this company: MSN Money Online, Yahoo Finance Online,
and its web site

Why I selected this company: First, this is a growing company as you can tell
from the table at the bottom of this section (EPS). For the FY ended Feb 2, 2002,
net sales increased 10% to $1.36 billion and net income also increased 7% to
$168.7 million. I think more people do exercise or go outside in summer and this
company’s clothes are very casual and sporty. From their financial statement, this
company makes more profit in 3rd and 4th Quarter. Therefore, I think they will make
more from July (3rd Quarter)…
Revenue - Quarterly Results (in Millions)
             FY (01/02)     FY (01/01)      FY (01/00)
1st Qtr           263.7          206.6           188.3
2nd Qtr           280.1          231.5           198.9
3rd Qtr           354.5          366.9           287.0
4th Qtr           466.6          432.6           367.9
Total          1,364.9        1,237.6         1,042.1

And their stock price looks good as well. From the chart above, you can tell the it
is now going up. I think this will be a good stock to hold until the end of this year
at least…
Earnings Per Share - Quarterly Results
                                         FY (01/02)      FY (01/01)          FY (01/00)
1st Qtr                                       $0.20           $0.16               $0.12
2nd Qtr                                       $0.24           $0.21               $0.17
3rd Qtr                                       $0.43           $0.43               $0.36
4th Qtr                                       $0.78           $0.76               $0.74
Total                                         $1.65           $1.56               $1.39

Company 2: JC Penny Company, Inc. (JCP)
This is incorporated in 1924. It has two wholly owned subsidiaries which are J.C.
Penny Corp (the department store chain which has 100 year history and catalog
and Internet business) and Eckerd Corp (the chain of 2600 drugstores). There are
more than 1100 JCPenny department stores and it offers fashion and basic
apparel, accessories, and home furnishing in their stores, in their catalogs, and
through the online store. Their goal has been the same since James Cash Penny
opened his first Golden Rule Store in 1902; “to serve the public, as nearly as we
can, to its complete satisfaction” (from their web site).
The Chairman and CEO is Allen Questrom.

Information source for this company: MSN Money Online, Yahoo Finance Online,
and their web site

Why I selected this company: Their earning news caught my eyes. The net income
doubled from $41 million to $86 million for the fiscal year ended 4/27/02. The
revenue also increased 3% to $7.73 billion. And its Beta is 0.5 which sounds also
nice. Some of the stocks in my portfolio are volatile, so it is nice to have a stock
whose Beta is lower.

Fundamental Analysis of a company in my portfolio:
Select a company from your portfolio. Research the company and be sure to include a reading of the
company’s 10K. Download its annual income statement, balance sheet, cash flow statement and earnings
estimate from or Show numbers for the following and
their annual growth rate for the past four years (3 growth rates). Note: you are calculating year to
year growth rate.
Attach a copy of the downloaded data to your paper.
Year                     1/2002                1/2001              1/2000           1/1999
Revenue for the          2086.7 M              1829.5 M            1384.0 M         1104.0 M
year (Income
Revenue Growth           14.1%                 32.2%               25.4%
Primary or Basic         0.67                  0.51                0.61             0.51
EPS (Income
Primary EPS              31.4%                 -16.4%              19.6%
Cash Flow from           205.0 M               181.3 M             105.7 M          79.7 M
Operations (Cash
Flow Statement)
Operating Cash           13.1%                 71.5%               32.6%
Flow Growth
Dividend                 0                     0                   0                0
Dividends Growth         -                     -                   -                -
Total Debt (Short        31.8 M                35.3 M              46.3 M           51 M
and Long Term
Debt from Balance
Debt Growth              -9.9%                 -23.8%              -9.2%
Equity or Book         532.5 M             427.5 M            383.3 M        302.0 M
Value (Balance
Equity Growth          24.6%               11.5%              26.9%
Stock Price at the     21.45 (Dec, 01)     10.0 (Dec, 00)     23.00 (Dec,    20.16 (Dec,
end of the year                                               99)            98)
Stock Price            114.5%              -56.5%             14.1%

What are the products of the company?
Home products for kitchens, bedrooms, and baths. When you go to their web site, you
will find in the section “SHOP” that they have “Bakewear”, “Bar”, “Books”, ”Cook wear”,
“Cooks’ Tools”, “Cutlery”, “Dinnerwear”, “Electrics”, “Flatwear”, “Food”, “Furnishings”,
“Glasswear”, “Home Décor”, “Housewears”, “Linens”, and “Outdoor”.

Write an assessment on management.
WSM has to be careful about following things;
*Keep an eye on consumer preferences, changes in consumer spending based on
weather or economic situation which companies can’t control.
*Costs of catalogs – if postal rates, paper, or printing costs increase, it will have a
negative impact. Also, if the catalogs can’t catch the favorable customers’ eyes, the
sales will decrease/
*It’s important to protect its intellectual property because it would affect the sales.

WSM did well on…;
Cost of goods; The percentage of net revenues for FY 2001 decreased to 56% from
56.1% due to “aggressive inventory management , increased merchandise margins and
lower freight costs in the retail channels offset by increased occupancy costs” (from 10-

What are growth rate and earnings expectations for the next two years?

                                                            (from MSN Money Online)
Both earning estimates and earning growth rates show us that WSM will be pretty good.
As the economy recovers, people start to spend more money for stuff like their products.
WSM has high quality goods which we use everyday. Some people may say that they
don’t need to buy those more expensive goods, but it is also the everyday goods as well.
WSM also brings new style goods which always attract their customers. Those who like
WSM stuff, usually like to visit the store often. WSM has a very good atmosphere where
people want to come back. If WSM keeps their policy of bringing attractive stuff to their
customer, I think the earnings will keep growing.

What are the company's prospects for the future (give reasons)?

As long as they keep their tight management of their inventories and costs, their net
income will grow. Their stores are always decorated nicely and people go there just to
“look” (I asked some of my friends and my host father and they liked going to visit their
stores and web site. I personally think website is very nice as they have nice pictures
and recipes (for free), and they offer seasonal products or seasonal section, like “Gift for
Dad’s day”). The sales’ future looks nice, but the problem is again, costs control and
protection of intellectual property. As 10K says, one of the biggest reasons for their
success is its trademarks, service marks, copyrights, patents, trade dress rights, trade
secrets, domain names and similar intellectual property. If the company can’t protect
them, consumers might go to the “similar” store with “similar” goods which have lower

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