Response To Stock Market Analysis: Purchasing Olympic Stock

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Course Name: Accounting
Course No.: Acc456
Professor
Semester: Fall
1.0 Response to Stock Market Analysis
As a stock portfolio manager, I shall seek to optimize stock investment returns, by identifying and investing in undervalued stocks.According toa stock analyst’s report, Olympic and Kenner stocks are undervalued since their price earnings ratio (P/E ratio) is slightly lower than the industry average. As a portfolio manager, I will first determine the P/E ratio for Olympic and Kenner and compare it with the prevailing industry average. According to the stock analyst, Olympics’ P/E ratio stands at6against the industry average of 8 (Madura 2006). From the analysts point of view, the stocks are undervalued, hence presents an attractive investment decision. From my independent perspective, it will be unwise to rely on the analyst’s advice since his assessment is based on a single fundamental valuation tool, P/E ratio. Given the complexity and multifaceted nature of quoted companies, it’s impossible to determine their stock value based on a single ratio. In my analysis, I shall use all available stock valuation ratios to help make a rational investment decision devoid of speculative bias.
Despite the recent decline in Olympic stock prices, driven by an anticipated decline in quarterly earnings linked to a recent restructuring program, I may still consider purchasing the stock. Reason being that the share price decline could have been purely speculative.Conversely, restructuring was motivated largely bya board decision aimed at boosting the company’s future performance. In my assessment, this would be a fundamental consideration in making a purchase decision. The share price decline could have been largely sparked by market speculation that the restructuring could have been aimed at correcting internal failures. As a result, most investors could have opted for a wait and see strategy, which could have pushed the demand of the stock down. It’s likely that analysts based their conclusions on speculative data that could turn out to be unrealistic(339).
QUESTION ONE
I may still consider purchasing Olympic stock after independentfundamental and technical analysis. A careful consideration of stockanalysts’ arguments on why it might be undervalued will also be necessary. Besides the presented arguments, I will also conduct my own stock valuation based on available company information and market fundamentals.
QUESTION 2
I may still consider purchasing Kenner Inc. stock in light of analyst’s arguments that the stock is undervalued.Kenner Inc. has a P/E ratio of 9 against the industry average of 11 (Madura 2006). Industry reports indicate that the company’s earnings have been consistently impressive in the recent past, even though it has lagged behind in technology adoption which could be a speculative reason that it may lose market share to competitors. This is proof that the undervaluation of Kenner’s stocks was purely speculative. I will independently review the company’s documents for information that could suggest that plans to adopt technology were underway. If it’s so, then I would consider purchasing the stock after carefu...