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Section 1: Introduction and Historical Informationresearch basic historical information about the firm, including the history of the firm and also discuss corporate governance and the major investors of this company.Section 2: Corporate performancediscuss the financial performance of the stock using ratio analysis conclude about the debt, profitability, market position of the company.Section 3: Risk and ReturnSection three of the project incorporates the concepts of historical return, and required rate of return Students need to show the price and dividend and returns histories of the stock over the specified period and to use this data to compute the average rate of return and the required rate of returnsSection 4: Stock valuationSection four of the project involves the use of the dividend discount model to calculate the required rate of return and to estimate the intrinsic value for their stock.The student then looks up the market price for their company to determine if the stock is fairly priced in the market.Section 5: ConclusionBased on all the data collected, provide recommendations concerning the stock. Discuss whether they would like to buy, hold, or sell the share of the company. Should contain at least three strengths and two weaknesses to support recommendation. The strengths or weaknesses should be based on the analysis in sections 1 to 4. Also discuss how the coronavirus spread might affect the recommendation. This section should contain at least eight sentences. To clarify, the chosen company is Nike, I also included the link to Yahoo finance where the data will be retrieved fromhttps://finance.yahoo.com/quote/NKE?p=NKE&.tsrc=fin-srch the_stock_analysis_project.doc Unformatted Attachment Preview Stock valuation Assignment Note: These questions will help you identify the information and data you need to collect for your analysis. Please do not include any of these questions in the report. However, the report should summarize the information collected using these questions. Section 1: Introduction & Historical Information (chapter 1, 2) 1. Identify a public company that has publicly traded stock (Hint: Choose one public company from the list of companies provided on canvas). The stock should have been traded for at least 5 years. The stock should have paid dividends every year from 2015 to 2019. List your company’s name, ticker symbol, and provide a brief description of the company’s business. 2. What is the history of the company? 3. How does this firm interact with financial markets? (Hint: it is a public company) 4. How does this firm view its social obligations and manage its image in society? 5. Who are the major shareholders of this company? 6. What is the industry of this company? Section 2: Corporate performance (chapter 3, 4) 7. Based on the financial statements provided on Yahoo Finance, what is the Price to Earnings ratios, Return on equity, Profit margin, and Time-interest-earned (Interest coverage) for 2018 and 2019? 8. Did the Ratios increase or decrease from 2018 to 2019? Based on these ratios, what is the debt, profitability, market position of your company? (provide a detailed interpretation of the trend for each ratio) 9. Identify two competitors in the same industry as the selected company. The two competitors might not be on the list provided on canvas. 10. Using the Yahoo finance, compute the Price to Earnings ratios, return on equity, Timeinterest-earned (Interest coverage), and profit margin for each of the competitors for 2019. Then, compute the average Price to Earnings ratios, return on equity, Time-interest-earned (Interest coverage), and profit margin using the two competitors for the year 2019? 11. Using the average ratios as proxies for the industry ratios, Compare the industry ratios to the ratios of the selected company for 2019. Based on this comparison, what is the debt, profitability, and market position of your company? Section 3: Risk and return 12. Using yahoo finance, collect the price for your chosen stock. Then, start on December 31, 2015, and trace the price history for your selected company. Using a graph and a table showing the price-per-share on December 31st for 2015, 2016, 2017, 2018, and 2019. (Hints: this should be the stock price on the last trading day of the year). 13. Using yahoo finance, prepare a table and a graph showing the dividend-per-share declared by the firm during the year 2015, 2016, 2017, 2018, and 2019. (Hints: this should be the total dividend paid in a year). 14. Using table(s) and graph(s), compute and show the rate of return for the years 2016 through 2019. (Hint: Remember, returns are calculated by subtracting the beginning price from the ending price to get the capital gain or loss, adding the dividend to the capital gain or loss, and dividing the result by the beginning price. For example, return in 2016= (price 2016 – price 2015 + dividend 2016)/price 2016). 15. Compute the average rate of return for your company. 16. What is the beta for your company? Is your company more or less risky than the market? (Use the most recent value of beta). 17. What is the required rate of return for your company on January 2nd, 2020? For estimating the required rate of return, assume that the market return is 11.55\%, and the risk-free rate is 2.465\% (Hint: use CAPM). 18. Compare the average rate of return for your company to the required rate of return of your company. Is your company overvalued, undervalued or fairly valued? Section 4: Stock valuation 19. What is the estimated growth rate of dividends from 2017 -2019 to 2023-2025? (Collected from value line survey) 20. What are the dividends for the year 2020, 2021, and 2023 to 2025? (Collected from value line survey). 21. Assuming that dividend per share will have a supernormal growth from 2020 to 2021 and the dividend will have a constant growth starting at the year 2022, Estimate the value of your stocks on January 2nd, 2020. You can use the required rate of return computed in question 17 for your calculations. (Hint: use the steps for a stock with nonconstant growth). 22. Look up the market price for your stocks on January 2nd,2020, and indicate if your stock was fairly priced, under-, or over-priced in the market. What action would you take to benefit from this disparity? If you feel that the market fairly priced your stock, discuss the possible reasons for your lack of faith in your analysis. Section 5 Conclusion: 23. Based on the information you gathered, what is your recommendation? Should you sell, buy, or hold the stocks of this company? Provide at least three strengths and two weaknesses to support your recommendation. The strengths and weaknesses should be based on the analysis in sections 1 to 4. Your answer should be at least five sentences. 24. Discuss how the spread of Coronavirus in 2020 might affect your recommendation. Provide two reasons why the spread of Coronavirus might lead you to change or keep your recommendation. Your answer should be at least three sentences. Additional guidelines Submission Instructions: Make sure to follow the submission guidelines: 1. Each submission must have two parts. A written report, which explains and interprets the results from your analysis. And an appendix section which includes all the calculations 2. For both submissions, Remember to put all the calculations in the appendix. You can refer to them but do not include any calculations in the written report. 3. Provide a complete reference list for each submission. 4. The references and citations should follow the APA format. 5. Each Submission must be typed, double-spaced, with 1-inch margins and 12-point type. Papers are limited to 6 pages. This does not include the appendix and the references. 6. Each Submission should include a cover sheet with the name of the chosen firm, the names of the team members, the course number, and the course section. (NIKE is the Firm) 7. Include the sections headers in both submissions Useful links: finance.yahoo.com https://research.valueline.com/research#sec=library Value line investment offers free access to the reports for a limited number of firms. Sample Appendices Appendix A Company and Industry ratio Table 1:The price to earnings ratio years Basic Earnings per share price per share on fiscal year-end PE 2018 $12.01 $225.74 18.79x 2019 $11.97 $223.97 18.72x trend Comments decreased Table 2:The price to earnings ratio for the industry years Basic Earnings per share 2019 price per share on fiscal year-end date 2019 PE Industry average 2019 Competitor 1 Competitor 2 (Microsoft) (DELL) Industry Comments $5.11 -$3.22 $133.96 26.22x $48.59 -15.09x 5.56x Better than the industry Table 3: Profit margin years Net income (in thousand) Sales or total revenues (in thousand) Profit margin 2018 2019 $59,531,000 $55,256,000 $265,595,000 $260,174,000 22.41\% 21.24\% trend Comments decreased Table 4:profit margin for the industry years Net income (in thousand) 2019 Sales or total revenues (in thousand) 2019 Profit margin Industry average 2019 Competitor 1 (Microsoft) $39,240,000 $125,843,000 31.18\% competitor 2(DELL) Industry Comments -$2,310,000 $92,154,000 -2.51\% 14.73\% Better than the industry Table 5:Return on equity years 2018 2019 trend Comments Net income (in thousand) common equity or total stockholders’ equity (in thousand) ROE $59,531,000 $55,256,000 $107,147,000 $90,488,000 55.56\% 61.06\% Competitor 1 (Microsoft) $39,240,000 competitor 2(DELL) -$2,310,000 $102,330,000 38.35\% -$2,765,000 83.54\% 60.95\% Better than the industry 2019 $63,930,000 $3,576,000 17.88x decreased decreased Table 6: ROE for the industry years Net income (in thousand) 2019 common equity or total stockholders’ equity (in thousand)2019 ROE Industry average 2019 Industry Comments Table 7:Interest coverage or Time-interest-earned years EBIT or operating income Interest charges or expenses TIE 2018 $70,898,000 $3,240,000 21.88x Table 8:Interest coverage or Time-interest-earned for the industry years EBIT or operating income (in thousand) 2019 Interest charges or expenses (in thousand) 2019 TIE Industry average 2019 Competitor 1 (Microsoft) $42,959,000 $2,686,000 15.99x competitor 2(DELL) Industry Comments -$191,000 $2,488,000 -0.08x 7.96x Better than the industry Appendix B risk and returns Price per share Year 2015 (hint: price on the latest trading date in 2015) 2016 (hint: price on the latest trading date in 2016) 2017 (hint: price on the latest trading date in 2017) 2018 (hint: price on the latest trading date in 2018) 2019 (hint: price on the latest trading date in 2019) Price per share 105.26 115.82 169.23 157.74 293.65 Dividends per share Year 2016 ( hint: total dividend in 2016) 2017 ( hint: total dividend in 2017) 2018 ( hint: total dividend in 2018) 2019 ( hint: total dividend in 2019) Dividend per share 2.23 2.46 2.82 3.04 the rate of return for the years 2015 through 2018 Year Total return 2016 2017 2018 2019 12.15\% 48.24\% -5.12\% 88.09\% 35.84\% Average return Apple beta retrieved on 04/21/2020 Beta risk compare to the market 1.17 more risky The required rate of return risk-free return Market return Beta Required rate of return=risk free rate+(Market return-risk free rate ) X beta Comparison of required returns to the average return 2.47\% 11.55\% 1.17 13.09\% undervalued Appendix C: Stock valuation Historical growth (estimated annual dividend rates for 17-19 to 23-25) 2020 dividend per share 2021 dividend per share 2022 dividend per share ( estimated Cash flow per share for 2023-2025) the required rate of return Horizon value in 2021 (dividend for 2022/(average return -historical growth) 12\% 3.18 3.38 5.4 13.09\% 493.40 Stock value 2020 dividend per share 2021 dividend per share Horizon value in 2021 total cash flows Stock value Stock price on January 2nd, 2020 2020 3.18 3.18 $391.21 $300.35 undervalued 2021 3.38 493.40 496.78 Appendix D: Graphs ... 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