BAT4M Final Summative Task Part 2
BAT4M - Financial Accounting
Final Summative Task Part 2
Creating an Equity Research Report
Goal: To conduct detailed research and analysis on a company of your choosing (note: use the
same company as your ISP to limit your work); to learn the formatting and structure of an equity
esearch report; to compose your own research report supporting a recommendation you make
for your company.
Instructions: Follow the below steps to complete your second draft submission.
Step 1: Valuations
Instruction: Follow the below steps to guide you in drafting the valuations section of you
eport.
1. Model for intrinsic value using discounted cash flow (DCF):
● Using Google Sheets or Microsoft Excel, model for you company's intrinsic value as
we learned in class and using the following assumptions:
○ Assume annual changes in free cash flow based on the average annual
change over the last five years calculated as follows:
■ Calculate the free cash flow change for each of the past five years
■ Calculate the average of those percent changes
■ Apply that average to your DCF model
○ Use the WACC (Weighted Average Cost of Capital) to discount you
projections. You can find the WACC by searching: “WACC for [your company]”
and it should show up at the top
■ If you have any trouble finding the WACC just let me know
● Include sources for all the numbers you are inputting in your calculation above
● Write one paragraph indicating what your company’s intrinsic value indicates generally
and what it might tell us when compared to the company’s price at the close of the
period you are reporting on.
2. Analyse EV/EBITDA ratio using the following steps:
● Look up your company’s EBITDA at the close of the period you are reporting on.
● Calculate your company’s EV at the close of the period you are reporting on.
○ EV is also available to look up but I would like to see your calculation
presented here, and if your number is different from what you look up that
means something is off.
● Show your EV/EBITDA ratio and include your calculation
● Write one paragraph indicating what your company’s EV/EBITDA ratio tells us about
the company’s value and how it compares to similar companies trading in the same
sector. (You can likely find the EV/EBITDA for the comparison companies by searching
“EV/EBITDA for [company name]”)
● Include sources for the numbers you are using in the above calculations
BAT4M - Financial Accounting
Final Summative Task Part 2
3. Analyse EPS and PE ratio using the following steps:
● Calculate your company’s EPS at the close of the period you are reporting on.
○ EPS is also available to look up but I would like to see your calculation
presented here, and if your number is different from what you look up, that
means something is off.
● Calculate your company’s PE ratio at the close of the period you are reporting on.
○ PE is also available to look up but I would like to see your calculation
presented here, and if your number is different from what you look up, that
means something is off.
● Write one paragraph indicating what your company’s EPS and PE ratio tells us about
the company’s value and how those valuations compare to similar companies trading
in the same sector.
● Include sources for the numbers you are using in the above calculations
Step 2: Investment Thesis, Catalysts and Risks
Instruction: Follow the below steps to guide you in drafting the investment thesis, catalysts
and risks section of your report.
1. Create an investment thesis using the following steps:
● Review all the information gathered from your prior work including the following:
○ Your ISP overview of your company
○ Your work on Part 1 of the FST analyzing your company’s recent performance
○ Your above work on your company’s valuation
○ Search: “investment thesis for [your company]” and review what other sources
have to say
● Drawing the above information, write 1-2 paragraphs (can include bullet points if that
makes what you are presenting clearer) detailing how you think a potential investo
should approach your company. For example, is it undervalued and they should buy,
or overvalued and they should short, or not likely to change much? Support you
thesis with the following:
○ What in the story of the company and its goals supports your thesis?
○ What in the company’s recent performance supports your thesis?
○ What in the company’s valuation supports your thesis?
○ NOTE: If not every data point supports your thesis directly, that is OK, but you
should still address it and explain your thinking. For example, you might say
something like “While ABC’s appears to be overvalued, I still believe the
company is a buy because of….”
● Based on the thesis you laid out, identify some target prices labeled as bull, bear and
ase case scenarios (see video from FST part 1).
○ NOTE: Even in the best research reports, these target prices are educated
guesses. In addition, the scope of our research is limited by the nature of this
project and you being new to this type of analysis. So don’t sweat getting this
exactly right, I am not marking you on accuracy. I am only evaluating that you
price targets fit with your thesis generally and that you have given some
BAT4M - Financial Accounting
Final Summative Task Part 2
thought to these numbers.
2. Identify catalysts using the following steps:
● Review all the information gathered so fa
● Create a bullet point list of when (ie date ranges) you expect your investment thesis to
play out and explain why you selected those dates (ie “Apple will be releasing its
newest i-Phone during Q4 2021”)
● This should ideally be 2-3 marks on the calendar that highlight different possible
catalysts
● Include sources for you catalysts (ie where did you learn that Apple was releasing a
new i-Phone)
3. Discuss investment risks using the following steps:
● Review all the information gathered so fa
● In either a paragraph or bullet point list, highlight the risks inherent in your thesis and
ecommendation
● A good framing question to ask yourself in compiling this section is: What might I have
totally wrong in the case I am making?
Step 3: Preparing A Draft Submission
Instructions: Review the below information before submitting this draft section of your FST.
Submissions are due by the date and time on Google Classroom in order to be reviewed
prior to next week’s class.
● This submission will be reviewed, commented on and marked only for completion
● The review and comments are meant to help you with your final submission
● Prepare your materials in draft form, which means the following:
○ You need to check spelling, grammar and write in clear and complete
sentences
○ The information you provide needs to be accurate and verifiable (i.e. I can
check it against your source)
○ You do not need to present this information in its final format since this is only
a part of the final report
● The marking ru
ic below will not be completed until the final submission but it is
included here for your reference when submitting your work
Marking Criteria Max Points Points Earned
Your report accurately shows understanding of all the
concepts we learned in class (Knowledge)
25
BAT4M - Financial Accounting
Final Summative Task Part 2
Your report appropriately applies the research you
conducted to the concepts we learned in class
(Application)
25
Your report demonstrates creative thinking in its
ability to draw conclusions, recommendations and
ideas (Thinking)
25
Your report follows all the instructions and is
presented in a well formed (spelling and grammar)
and clearly understandable format (Communication)
25
Total 100