Recommendation Report on Currently Overvalued or Undervalued Common Stocks in US Stock Markets

Company Description

Suppose you are an investment analyst, your supervisor, a portfolio manager asked you to write a brief recommendation report to recommend one (1) currently overvalued or undervalued common stock in US stock markets. The “currently overvalued or undervalued” means the  company's target price at the end of this current fiscal year or at the end of next fiscal year should be at least 20% lower or higher than its market price at the end of September 2019." You may recommend any common stocks listed on the NYSE, AMEX, NASDAQ for which you can retrieve price and accounting information from the internet. The report must include detail qualitative and quantitative analysis from part (1) to part (3) below.

1. The report should start with a description of the company to help investors understand the business, its industry, its motivation, and any advantages (or disadvantages) it might have over its competitors. Please explain why this company might be a profitable investment for investors by gong long or gong short. A firm’s annual report with the Securities and Exchange Commission (SEC) provide ideal starting points; which is the original company filings for important details. More valuable detail can be obtainedfrom industry trade journals,  from key rivals, and other analyst reports.

2. A fundamental analysis, which contains your research on the firm’s financial statements, such as sales and profit growth trends, cash flows strength, debt levels and overall financial performance (such as turnover ratios, ROA, ROE), and how this compares to the competition.

3. Please show how did you calculate the target price for the common stock you recommend. Predict the target price at the end of the current fiscal year on the company that you have selected. Suppose the recommendation report will be sent to investors by the end of October 2019, so please select the companies whose current fiscal year or next fiscal year will be ended from Nov. 1st. 2019 till Oct. 31. 2021. Please only select the companies whose target price be at least 20% lower (or higher) than its market price at the end of September 2019.

Your security valuation should be based on the at least two (2) of the following security valuation methods; you must calculate the company’s Beta by yourself if the Beta is required in your target price estimation. The stock’s Beta must be estimated by using previous 36 to 60 monthly returns. If the company does not have 36-month return data, the stock’s Beta can be estimated by using previous 120 daily returns.

a. Two-stage dividend growth model or Three-stage dividend growth model

b. The residual income model

c. The free cash flow model

d. P/E Ratio or Price-book ratio (P/B ratio)

e. Price-cash flow ratio (P/CF ratio) or a price-sales ratio (P/S ratio)

f. Enterprise Value Ratio

1. Due date and time, 6:00 PM, Friday, Oct. 18, 2019. You will be required to submit a soft copy of the report on Moodle only. Hard copy submission is not required.

2. The report is limited to 1200-2000 words, not include the tables, graphs, references. The report must be typed-written using Times New Roman, font size 12 with 1.5 spacing and double spacing between paragraphs.

3. All work submitted must be original. Make references to the sources of materials used for your report. The assignment will be check by the Turnitin to check for plagiarism (see Moodle). If the Turnitin similarity score exceeds 20%, your assignment will be considered as a plagiarised report and marked as zero.