Value analysis

General Description

This is a replication of section 6.7 “An Analysis of the E.I. du Pont Company” in your textbook. We went over many valuation models of stocks. This section applies them all on E. I. du Pont Company.

Your project is going to be the replication of the same methodology on the stock you chose from Value Line’s Dow Jones Industrial stocks. As I showed in class, you already know how to get the Value Line Analysis Chart from Value Line website.

We discussed in class some of the issues that you may encounter. Some are, but not limited to, time period you will choose for your calculations, 5-year, 7-year, 10-year, etc. Another issue is not all the valuation models will give you meaningful results and the same value, as you can see on p. 207 of the summary result for E. I. du Pont Company valuation as presented in your text. Therefore, you will run into one big problem: Since you will have more than one value for the company, then which one will be the ultimate outcome or what process you will use for the ultimate value of the company stock? You must support your valuation decision, in other words.

Note that your text uses different sources for valuation. I ask you to use Value Line data. It is easier to use all data provided in Value Line. Read the text for extra information and understanding of the issues.

Here are the guidelines for what you will have to do.

1. Your text must not be more than three pages. It must include “Introduction”, Section(s) you decide on, and “Conclusion”.

2. Appendix can be more and this is where you will show the data you use in calculating every valuation model and the result of each valuation.

3. You must print out and submit your company’s Value Line Analysis Chart as part of the homework.

4. Highlight all the data you use in your calculations. For example, if you are using “Earnings per share” for the last 10 years as data to come up with “average earning”, highlight the last 10 years of earnings.

You may wonder why I do insist on the data you use in your calculations. If someone wants to replicate your results, (or to find out if you made any mistake), from those numbers you provide one should be able to confirm.

5. You must have an overall table where you show all the results, similar to the information provided on p. 207 in the text. Once you show all the results, please also present your ultimate value for the company stock. In other words, please present your ultimate valuation number.

GOOD LUCK

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