Chapter14IndustryAnalysis(投资分析与投资组合管理)(45页PPT).pptx

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1、Lecture Presentation Software to accompanyInvestment Analysis and Portfolio ManagementSeventh Editionby Frank K.Reilly&Keith C.BrownChapter 14Chapter 14Industry AnalysisQuestions to be answered:Is there a difference between the returns for alternative industries during specific time periods?What is

2、the implication of these results?Is there consistency in the returns for individual industries over time?What do these results imply regarding industry analysis?Chapter 14Industry AnalysisIs the performance for firms within an industry consistent?What is the implication of these results for industry

3、 and company analysis?Is there a difference in risk among industries?What are the implications of these results for industry analysis?Chapter 14Industry AnalysisWhat happens to risk for individual industries over time?What does this imply for industry analysis?What are two variables that need to be

4、estimated whether you use cash flow models or relative valuation ratios?Chapter 14Industry AnalysisGiven the present value of cash flow valuation techniques,how does an analyst determine the value of an industry using the DDM and assuming constant growth or two stage growth?How does an analyst deter

5、mine the value of an industry using the free cash flow to equity(FCFE)model with constant growth or two stage growth?Chapter 14Industry AnalysisWhat are the steps involved in estimating earnings per share for an industry?What are the stages in the industrial life cycle and how does the life cycle st

6、age affect the sales estimate for an industry?What are the five basic competitive forces that determine the intensity of competition in an industry and thus,its rate of return on capital?Chapter 14Industry AnalysisHow does the estimating procedure for the operating profit differ for the aggregate ma

7、rket versus an industry?What are the two alternative procedures for estimating an industry earnings multiplier?Chapter 14Industry AnalysisWhat is involved in a macroanalysis of the industry earnings multiplier?What are the steps in the microanalysis of an industry earnings multiplier?After you estim

8、ate an industry earnings multiplier,how do you determine if the industrys multiplier is relatively high or low?Chapter 14Industry AnalysisHow do industries differ in terms of what dictates their return on assets?What are some of the unique factors that must be considered in global industry analysis?

9、Why Do Industry Analysis?Help find profitable investment opportunitiesPart of the three-step,top-down plan for valuing individual companies and selecting stocks for a portfolioWhat Do We Learn From Industry Analysis?Is there a difference between the returns for alternative industries during specific

10、 time periods?Will an industry that performs well in one period continue to perform well in the future?That is,can we use past relationships between the market and an individual industry to predict future trends for the industry?What Do We Learn From Industry Analysis?Do firms within an industry sho

11、w consistent performance over time?What Do We Learn From Industry Analysis?Do firms within an industry show consistent performance over time?Is there a difference in the risk for alternative industries?What Do We Learn From Industry Analysis?Do firms within an industry show consistent performance ov

12、er time?Is there a difference in the risk for alternative industries?Does the risk for individual industries vary or does it remain relatively constant over time?Industry PerformanceWide dispersion in rates of return in different industriesPerformance varies from year to yearCompany performance vari

13、es within industriesRisks vary widely by industry but are fairly stable over timeThe Business Cycle and Industry SectorsEconomic trends can and do affect industry performanceBy identifying and monitoring key assumptions and variables,we can monitor the economy and gauge the implications of new infor

14、mation on our economic outlook and industry analysis The Business Cycle and Industry SectorsCyclical or Structural ChangesCyclical changes in the economy arise from the ups and downs of the business cycleStructure changes occur when the economy undergoes a major change in organization or how it func

15、tionsRotation strategy is when one switches from one industry group to another over the course of a business cycle The Business Cycle and Industry SectorsEconomic Variables and Different IndustriesInflationInterest RatesInternational EconomicsConsumer Sentiment The Stock Market and the Business Cycl

16、eExhibit 14.2The Stock Market and the Business CycleExhibit 14.2troughpeakThe Stock Market and the Business CycleExhibit 14.2Financial Stocks ExceltroughpeakConsumer Durables ExcelCapital Goods ExcelBasic Industries ExcelConsumer Staples ExcelStructural Economic Changes and Alternative IndustriesSoc

17、ial InfluencesDemographicsLifestylesTechnologyPolitics and regulationsEconomic reasoningFairnessRegulatory changes affect numerous industriesRegulations affect international commerceEvaluating the Industry Life CycleFive Stage ModelPioneering developmentRapidly accelerating industry growthMature ind

18、ustry growthStabilization and market maturityDeceleration of growth and declineAnalysis of Industry CompetitionCompetition and Expected Industry ReturnsPorters concept of competitive strategy is described as the search by a firm for a favorable competitive position in an industryTo create a profitab

19、le competitive strategy,a firm must first examine the basic competitive structure of its industryThe potential profitability of a firm is heavily influenced by the profitability of its industry Competitive Structure of an IndustryPorters Competitive ForcesRivalry among existing competitorsThreat of

20、new entrantsThreat of substitute productsBargaining power of buyersBargaining power of suppliersEstimating Industry Rates of ReturnPresent value using required rate of return for the equity in the industryTwo-step P/E ratio approach uses expected value at the end of investment horizon and compute th

21、e expected dividend return during the periodValuation using the reduced form DDMPi=the price of industry i at time tD1=the expected dividend for industry i in period 1 equal to D0(1+g)k=the required rate of return on the equity for industry ig=the expected long-run growth rate of earnings and divide

22、nd for industry iEstimating the Required Rate of ReturnInfluenced by the risk-free rateExpected inflation rateRisk premium for the industry versus the marketbusiness risk(BR)financial risk(FR)liquidity risk(LR)exchange rate risk(ERR)country political risk(CR)Or compare systematic risk(beta)for the i

23、ndustry to the market beta of 1.0Estimating the Expected Growth RateEarnings and dividend growth are determined by the retention rate and the return on equityEarnings retention rate of industry compared to the overall marketReturn on equity is a function of the net profit margintotal asset turnovera

24、 measure of financial leverageIndustry Valuation Using the Free Cash Flow to Equity(FCFE)ModelFCFE is defined as follows:Net income+Depreciation-Capital expenditures-D in working capital-Principal debt repayments+New debt issuesIndustry Valuation Using the Free Cash Flow to Equity(FCFE)ModelThe Cons

25、tant Growth FCFE ModelThe Two-Stage Growth FCFE Model The Earnings Multiple TechniqueEstimating earnings per sharestart with forecasting sales per shareIndustrial life cycleInput-output analysisIndustry-aggregate economy relationshipearnings forecasting and analysis of industry competitioncompetitiv

26、e strategycompetitive environmentindustry operating profit marginindustry earnings estimateindustry earnings multiplierIndustry Profit Margin ForecastIndustrys operating profit margin(EBITDA/Sales)Depreciation expenseinterest expensetax rateIndustry Profit Margin ForecastIndustrys operating profit m

27、argin(EBITDA/Sales)Regression analysisTime series analysisLong-term consideration including competitive structureIndustry Profit Margin ForecastDepreciation expenseGenerally increasing time seriesSpecific estimate technique using the depreciation expense/PPE ratioSubtract depreciation from operating

28、 profit margin to determine industrys net before interest and taxesIndustry Profit Margin ForecastInterest expense is a function of financial leverage and interest rates1.Calculate the annual total asset turnover(TATO)2.Use your current sales estimate and an estimate of TATO to estimate total assets

29、 next year3.Calculate the annual long-term(interest bearing)debt as a percent of total assets,4.Estimate long-term debt for the next yearIndustry Profit Margin ForecastInterest expense(cont.)5.Calculate the annual interest cost as a percent of long-term debt and analyze the trend6.Estimate next year

30、s interest cost of debt for this industry based upon your prior estimate of market yields7.Estimate interest expense based on the following estimates:(Interest Cost of Debt)(Outstanding Long-Term Debt)Industry Profit Margin ForecastTax rateRegression analysisTime series plotAfter estimating the tax

31、rate,multiply the EBT per share value by(1-tax rate)to estimate earnings per shareDerive an estimate of industrys net profit margin as a check on your EPS estimateEstimating an Industry Earnings MultiplierMacroanalysisrelationship between multiplier for the industry and the marketvariables that infl

32、uence the multiplier:required rate of return(k)function of the nominal risk-free rate plus a risk premiumexpected growth rate of earnings and dividenddividend payout ratioEstimating an Industry Earnings MultiplierMicroanalysisEstimate the variables that influence the industry earnings multiplier and

33、 compare them to the comparable values for the market P/EIndustry multiplier versus the market multiplierComparing dividend-payout ratiosEstimating the required rate of return(k)Estimating the expected growth rate(g)g=Retention Rate(b)X Return on Equity(ROE)=(b)X(ROE)Other Relative Valuation Ratios

34、Price-to-book value ratios(P/BV)Price-to-cash flow ratios(P/CF)Price-to-sales ratios(P/S)Global Industry AnalysisThe macroeconomic environment in the major producing and consuming countries for this industryAn overall analysis of the significant companies in the industry and the products they produc

35、eWhat are the accounting differences by country and how do these differences impact the relative valuation ratios?What is the effect of currency exchange rate trends for the major countries?The InternetInvestments OnlineEnd of Chapter 14Industry AnalysisFuture topicsChapter 15 Company Analysis and S

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