FIN501 Strategic Corporate Finance (Essay Sample)
OCK AND BOND VALUATION
For your second SLP assignment, continue to do research on the company youchose to write about for your Module 1 SLP. This time you will be doing researchabout the valuation of the company to try to determine if its stock price is overvaluedor undervalued. You can use Google Finance, Yahoo Finance, or similar Web pagesto find the financial information about this company.Write a 2- to 3-page paper with the following items:
1. What is the P/E ratio of this company? How does the P/E ratio compare to othercompanies in this industry? Based on the P/E ratio, do you think the company isovervalued or undervalued?
2. Find the company’s balance sheet. Calculate the book value of each share. Thiscan be done by taking the total assets and subtracting total liabilities. Then dividethe number you get by the total number of outstanding shares. Is the number youget higher or lower than the current price of the share? Based on what you’vefound, would you say the stock is overvalued or undervalued?
3. Finally, do a search on what different analysts have to say about your company.
Do they generally recommend buying the stock or selling the stock? Whatreasons to they give for their assessment? Find at least three analyst reportsabout this company.
SLP Assignment ExpectationsAnswer the assignment questions directly.
Stay focused on the precise assignment questions. Do not go off on tangents ordevote a lot of space to summarizing general background materials.
For computational problems, make sure to show your work and explain yoursteps.For short answer/short essay questions, make sure to reference your sources ofinformation with both a bibliography and in-text citations. See the Student Guideto Writing a High-Quality Academic Paper, including pages 11-14 on in-textcitations. Another resource is the “Writing Style Guide,” which is found under “MyResources” in the TLC Portal.source..
Module 2 – SLP Stock and Bond Valuation
FIN501 Strategic Corporate Finance
What is the P/E ratio of this company? How does the P/E ratio compare to other companies in this industry? Based on the P/E ratio, do you think the company is overvalued or undervalued?
The price/earnings (P/E) ratio is the market price divided by the earnings-per-share. According to Yahoo Finance (2019) the latest P/E Ratio (TTM) for Microsoft is 27.23, while for Oracle Corporation the P/ E is 18.02 compared to 19.16 for Apple and 24.96 for Alphabet Inc. (GOOG). In 2019, Google's parent company, Alphabet together with Apple and Amazon are the most valuable companies in the world. The P/E is one of the most widely used methods to measure the relative valuation of shares
Comparing the current P/E ratio with the historical P/E ratio and the P/E ratios for other firms and the industry provides insights on whether the stock is undervalued or overvalued. When comparing the four companies, Microsoft has the highest P/ E ratio and this indicates that the company’s stock is high relative to the earnings and likely overvalued. Microsoft reached the $1 trillion market capitalization in 2019 based on better than expected financial results and there has been increased demand for the company’s stock, which has pushed the stock price even higher.
Find the company’s balance sheet. Calculate the book value of each share. This can be done by taking the total assets and subtracting total liabilities. Then divide the number you get by the total number of outstanding shares. Is the number you get higher or lower than the current price of the share? Based on what you’ve found, would you say the stock is overvalued or undervalued?
In the year ended 30th June 2019, the total assets was $286,556,000, 000 and the total liabilities were $184,226,000,000 and the net assets being the difference between
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