Students are to form themselves in groups of four and advise me of the members by 16th January. Each group of four students is required to undertake a full company analysis and share price estimate for the GAP. The case report should be presented as a formal report document of about 8 pages (not including supporting spreadsheets) and all students must sign the final report affirming that they made an equal contribution.
To undertake the project you are provided with:
i.A handout that details the background, analyst recommendations and financial data of the GAP ; ii.
Chapter 6 of Palepu et al., “Business Analysis and Valuation” available on blackboard under case study iii.A brief background lecture
Answer the four questions in the GAP handout on page 180, viz: You are free to undertake the case study as you wish. However, you should work as a team but you may wish to assign each member of the team to different tasks which may encompass:
•Providing an analysis the financial performance over the past five years, particularly in relation to competitors and the general industry sector in which GAP operates.
•Reviewing the analysts’ report on the performance and investment potential of GAP. •Carrying out a comprehensive financial ratio analysis performance for the years which you have the annual reports and do a past time series analysis of these ratios. •Relative to the competition
•Relative to profit drivers (Return on equity = Profit margin X Asset turnover X Equity multiplier). A Dupont ratio analysis may be useful here (see pp. 64-67 Ross et al. Essentials of Corporate Finance. Chapters 2,3 also useful for background on financial ratios and accounting valuation techniques. •Describing the main qualitative information available within the notes to the accounts and the remainder of the annual report which enables you to better understand the meaning of the financial statements. Recommend if there are any adjustments to the accounts and if so provide reasons and financial impact. •Building up a spreadsheet to forecast free cash flows over a selected future period (between 5-10 years) together with
a terminal value estimate at a designated year (submit a copy of the excel spreadsheet with your case study). •Make all assumptions clear.
•State clearly your estimate of the current share price. •Does it differ from the analyst(s) estimate of price in the case study? Why or why not? •What assumptions does the analyst have to make to justify a price of $55?
In the final two pages of your case report your group should pull together all the information you have learned about GAP to write a summary of its current position and future performance potential. A recommendation on a buy/sell/hold that is scientifically justified should be made.
Present your report as a final report to the Board of Directors of a pension fund who is considering the purchase of GAP shares to add to the portfolio.
Cite this Gap Analysis
Gap Analysis. (2016, Oct 28). Retrieved from https://graduateway.com/gap-analysis/