Chapter14IndustryAnalysis(投资分析与投资组合管理).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? Wh

2、at is 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 Analysis Is the performance for firms within an industry consistent? What is the implication of these results fo

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

4、hat need to be estimated whether you use cash flow models or relative valuation ratios?Chapter 14Industry Analysis Given 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 doe

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

6、does the life cycle stage 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 Analysis How does the estimating procedure for the operating profit di

7、ffer for the aggregate market versus an industry? What are the two alternative procedures for estimating an industry earnings multiplier?Chapter 14Industry Analysis What is involved in a macroanalysis of the industry earnings multiplier? What are the steps in the microanalysis of an industry earning

8、s multiplier? After you estimate an industry earnings multiplier, how do you determine if the industrys multiplier is relatively high or low?Chapter 14Industry Analysis How do industries differ in terms of what dictates their return on assets? What are some of the unique factors that must be conside

9、red in global industry analysis?Why Do Industry Analysis? Help find profitable investment opportunities Part 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 al

10、ternative industries during specific 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 A

11、nalysis? Do firms within an industry show 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

12、 an industry show consistent performance over 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 Performance Wide dispersion in rates of return in different industries Performance v

13、aries from year to year Company performance varies within industries Risks vary widely by industry but are fairly stable over timeThe Business Cycle and Industry Sectors Economic trends can and do affect industry performance By identifying and monitoring key assumptions and variables, we can monitor

14、 the economy and gauge the implications of new information on our economic outlook and industry analysis The Business Cycle and Industry Sectors Cyclical or Structural Changes Cyclical changes in the economy arise from the ups and downs of the business cycle Structure changes occur when the economy

15、undergoes a major change in organization or how it functions Rotation strategy is when one switches from one industry group to another over the course of a business cycle The Business Cycle and Industry Sectors Economic Variables and Different Industries Inflation Interest Rates International Econom

16、ics Consumer Sentiment The Stock Market and the Business CycleExhibit 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 E

17、xcelStructural Economic Changes and Alternative Industries Social Influences Demographics Lifestyles Technology Politics and regulations Economic reasoning Fairness Regulatory changes affect numerous industries Regulations affect international commerceEvaluating the Industry Life CycleFive Stage Mod

18、el Pioneering development Rapidly accelerating industry growth Mature industry growth Stabilization and market maturity Deceleration of growth and declineAnalysis of Industry CompetitionCompetition and Expected Industry Returns Porters concept of competitive strategy is described as the search by a

19、firm for a favorable competitive position in an industry To create a profitable competitive strategy, a firm must first examine the basic competitive structure of its industry The potential profitability of a firm is heavily influenced by the profitability of its industry Competitive Structure of an

20、 Industry Porters Competitive ForcesRivalry among existing competitorsThreat of new entrantsThreat of substitute productsBargaining power of buyersBargaining power of suppliersEstimating Industry Rates of Return Present value using required rate of return for the equity in the industry Two-step P/E

21、ratio approach uses expected value at the end of investment horizon and compute the expected dividend return during the period Valuation using the reduced form DDMgkDPi1Pi = 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 o

22、f return on the equity for industry ig = the expected long-run growth rate of earnings and dividend for industry iEstimating the Required Rate of Return Influenced by the risk-free rate Expected inflation rate Risk premium for the industry versus the market business risk (BR) financial risk (FR) liq

23、uidity risk (LR) exchange rate risk (ERR) country political risk (CR) Or compare systematic risk (beta) for the industry to the market beta of 1.0Estimating the Expected Growth Rate Earnings and dividend growth are determined by the retention rate and the return on equityEarnings retention rate of i

24、ndustry compared to the overall marketReturn on equity is a function of the net profit margin total asset turnover a 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

25、capital- Principal debt repayments+ New debt issuesIndustry Valuation Using the Free Cash Flow to Equity (FCFE) Model The Constant Growth FCFE Model The Two-Stage Growth FCFE Model gkFCFEV1The Earnings Multiple Technique Estimating earnings per share start with forecasting sales per share Industrial

26、 life cycle Input-output analysis Industry-aggregate economy relationship earnings forecasting and analysis of industry competition competitive strategy competitive environment industry operating profit margin industry earnings estimate industry earnings multiplierIndustry Profit Margin Forecast Ind

27、ustrys operating profit margin (EBITDA / Sales)Depreciation expenseinterest expensetax rateIndustry Profit Margin ForecastIndustrys operating profit margin (EBITDA / Sales) Regression analysis Time series analysis Long-term consideration including competitive structureIndustry Profit Margin Forecast

28、Depreciation expense Generally increasing time series Specific estimate technique using the depreciation expense/PPE ratio Subtract depreciation from operating profit margin to determine industrys net before interest and taxesIndustry Profit Margin ForecastInterest expense is a function of financial

29、 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 next year3. Calculate the annual long-term (interest bearing) debt as a percent of total assets, 4. Estimate long-term debt for the next

30、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 years interest cost of debt for this industry based upon your prior estimate of market yields7. Estimate interest expense based on the

31、 following estimates: (Interest Cost of Debt) (Outstanding Long-Term Debt)Industry Profit Margin ForecastTax rate Regression analysis Time series plot After estimating the tax rate, multiply the EBT per share value by (1 - tax rate) to estimate earnings per share Derive an estimate of industrys net

32、profit margin as a check on your EPS estimateEstimating an Industry Earnings Multiplier Macroanalysis relationship between multiplier for the industry and the market variables that influence the multiplier: required rate of return (k) function of the nominal risk-free rate plus a risk premium expect

33、ed growth rate of earnings and dividend dividend payout ratioEstimating an Industry Earnings Multiplier Microanalysis Estimate the variables that influence the industry earnings multiplier and compare them to the comparable values for the market P/E Industry multiplier versus the market multiplier C

34、omparing dividend-payout ratios Estimating 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 Price-to-book value ratios (P/BV) Price-to-cash flow ratios (P/CF) Price-to-sales ratios (P/S

35、)Global Industry Analysis The macroeconomic environment in the major producing and consuming countries for this industry An overall analysis of the significant companies in the industry and the products they produce What 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 Stock Selection Value Growth Strategies