MarketAnalysis(投资分析与投资组合管理)wmf.pptx

Lecture Presentation Software to accompanyInvestment Analysis and Portfolio ManagementSeventh Editionby Frank K.Reilly&Keith C.BrownChapter 13Chapter 13Stock Market AnalysisQuestions to be answered:How do we apply the basic reduced form dividend discount model(DDM)to the valuation of the aggregate stock market?What would be the prevailing value of the market as presented by the S&P 400 based upon the reduced form DDM?What would be the prevailing value of the market(S&P 400)based upon the value of free cash flow to equity(FCFE)model?Chapter 13Stock Market AnalysisWhat are the two components involved in the two-part valuation procedure?Given the two components in the valuation procedure,which is more volatile?What steps are involved in estimating the earnings per share for an aggregate market series?What variables affect the aggregate operating profit margin and how do they affect it?Chapter 13Stock Market AnalysisWhat are the variables that determine the level and changes in the market earnings multiplier?How do you arrive at an expected market value and an expected rate of return for the stock market?What has happened to the values for the other relative valuation ratios-i.e.,the P/BV,P/CF,and P/S ratios?Chapter 13Stock Market AnalysisWhat additional factors must be considered when you apply this microanalysis approach to the valuation of stock markets around the world?What are some differences between stock market statistics for the U.S.versus other countries?Applying the DDM Valuation Model to the MarketThe stream of expected returnsThe time pattern of expected returnsThe required rate of return on the investmentApplying the DDM Valuation Model to the MarketDeterminants of the Earnings Multiplier:1.The expected dividend payout ratio2.The required rate of return on the stock3.The expected growth rate of dividends for the stockMarket Valuation Using the Reduced Form DDMEstimating k and g for the U.S.equity marketThe nominal risk-free rateThe equity risk premiumThe current estimate of Risk Premium and kEstimating the growth rate of dividends(g)g=f(b,ROE)ROE=Net Income/EquityEstimating Growth RateGrowth rate of dividends is equal toRetention rate-the proportion of earnings retained and reinvested Return on equity(ROE)rate of return earned on investmentAn increase in either or both of these variables causes an increase in the expected growth rate(g)and an increase in the earnings multiplier Return on Equity(ROE)Profit Total Asset Financial Margin Turnover Leverage=xxMarket Valuation Using the Free Cash Flow to Equity(FCFE)ModelFCFE is:+Net Income+Depreciation Expense-Capital Expenditures-D in Working Capital-Principal Debt Repayments+New Debt issuesMarket Valuation Using the Free Cash Flow to Equity(FCFE)ModelThe Constant Growth FCFE ModelThe Two Stage Growth FCFE ModelMarket Valuation Using Relative Valuation ApproachThe price-earnings ratio(P/E)The price-book value ratio(P/BV)The price-cash flow ratio(P/CF)The price-sales ratio(P/S)Market Valuation Using Relative Valuation ApproachTwo-part valuation procedureMarket Valuation Using Relative Valuation ApproachImportance of both components of value1.Estimating the future earnings per share for the stock-market series2.Estimating a future earnings multiplier for the stock-market seriesEstimating Expected Earnings Per ShareEstimating expected earnings per shareEstimate sales per share for a stock-market seriesEstimate the operating profit margin for the seriesEstimate depreciation per share for the next yearEstimate interest expense per share for the next yearEstimate the corporate tax rate for the next yearEstimating Gross Domestic ProductEstimating sales per share for a market seriesEstimating Expected Earnings Per ShareAlternative estimates of corporate net profitsDirect estimate of the net profit margin based on recent trendsEstimate the net before tax(NBT)profit marginEstimate an operating profit margin to obtain EBITDA;estimate depreciation and interest to arrive at EBT;estimate the tax rate(T)and multiply by(1-T)to estimate net incomeEstimating Expected Earnings Per ShareEstimating aggregate operating profit marginsCapacity utilization rateUnit labor costsRate of inflationForeign competitionEstimating Expected Earnings Per ShareEstimating depreciation expensetime series trendsestimate based on property,plant,and equipmentsales and turnoverdepreciationEstimating Expected Earnings Per ShareEstimating interest expensedebt levelstotal assetsexpected capital structureinterest ratessubtract result from EBIT to estimate EBTEstimating Expected Earnings Per ShareEstimating the tax ratedepends on future political actionmultiply(1-T)times the EBT per-share to estimate the net income per shareEstimating the Earnings Multiplier for a Stock Market SeriesDeterminants of the earnings multiplier Dividend payout ratiorequired rate of return on common stockthe expected growth rate of dividends for the stocksEstimating the Earnings Multiplier for a Stock Market SeriesEstimating the required rate of return(k)inversely related to the earnings multiplierdetermined by risk-free rate,expected inflation,and the risk premium for the investmentEstimating the dividend payout ratio(D/E)active decision or residual outcome?time series plotslong-run perspectiveEstimating the Earnings Multiplier for a Stock Market SeriesEstimating an Earnings Mutiplier:An ExampleThe Direction of Change ApproachSpecific Estimate ApproachCalculating an Estimate of the Value for the Market seriesOther Relative Valuation RatiosPrice to book value ratio(P/BV)Price to cash flow ratio(P/CF)Price to sales ratio(P/S)Analysis of World MarketsIndividual country analysisanalyze economy and security markets before analyzing alternative industries or companiesmacro techniquesmicro techniquestechnical analysistop down approachThe InternetInvestments OnlineEnd of Chapter 13Stock Market AnalysisFuture topicsChapter 14 Why do industry analysis?Competition and expected industry returnsEstimating an industry earnings multiplier