University of Maryland Baltimore Bond and Stock Performance Analysis

Bond and Stock Performance Analysis

OBJECTIVE

In this part of the project you are to assume to have been hired to join a team serving as an internal financial analyst to THE COMPANY. Your client plans to invest in bonds and (or) stocks issued by THE COMPANY (SELECTED BY INSTRUCTOR). In part 6 of the assignment you are asked to provide some recommendations to THE COMPANY’S management.  

THE COMPANY (Bain Capital) for part 2 of the project can be the company that you were using for the Research Project Part 1 or ANOTHER COMPANY determined by your professor. THE COMPANY for this part of the project must have bondslisted on the website http://finra-markets.morningstar.com/BondCenter/Default.jsp. To find the information on bonds, click on Search in the middle of the screen (under Market Center Bond Guide), under Quick Search type the Issuer Name and the Symbol, and click SHOW RESULTS.

Alternatively, you can request approval of another publicly traded company. This request must be submitted before the end of the first week of the course. The request must include

identification of the company by ticker symbol and name

a reasonable and appropriate explanation of why you want to examine the alternative company

the source of the analyst’s report that will be used in the analysis (which must be submitted to me)

acknowledgement by you that all the specific elements of the assignment (see below) will be prepared by you and included in the final research project report

SUGGESTED WEBSITES

www.morningstar.com – To find the information for your company you need to type the stock symbol in the Quoteswindow to get into the company’s page.

• http://finra-markets.morningstar.com/BondCenter/Default.jsp – To find the information on bonds, click on Search in the middle of the screen (under Market Center Bond Guide), under Quick Search type the Issuer Name and the Symbol, and click SHOW RESULTS.
• https://markets.businessinsider.com/bonds. To find the information on bonds, scroll down the page, type the name of the company in the window under Bond Finder, and click SEARCH.
• www.marketwatch.com  -To find the information for your company you need to type the stock symbol in the Searchwindow to get into the company’s page.
• www.money.cnn.com  -To find the information for your company you need to type the stock symbol in the Searchwindow to get into the company’s page.

www.finance.yahoo.com – To find the information for your company you need to type the stock symbol in the Searchwindow to get into the company’s page.

www.nyse.com – Click on Data, then click on Stocks (under Quotes), and type the name of the company or the stock symbol in the window “Keyword or symbol” to get into the company’s page.

www.nasdaq.com – To find the information for your company you need to type the stock symbol in the Search window to get into the company’s page.

Company’s websites

YOUR SPECIFIC ASSIGNMENT

Using the information from the websites the student will develop evaluation of bond and stock performance for THE COMPANY (SELECTED BY INSTRUCTOR). (The evaluation portion will total 85% of the assignment grade)  

-1—Introduction (3% of the project grade)– The paper should begin with a short introduction that explains the purpose of the paper, and provides an overview of the contents that follow (one short paragraph). 

-2- The financial leverage ratios (15% of the project grade) 

a) Find the financial leverage ratios for THE COMPANY assigned for you of the project for the last 3-5 years in the Internet. Present these ratios as the table(s) in your project.

You can find these ratios in the Internet or calculate them. If you use published ratios you must indicate that and cite their source.

Debt-to-assets ratio (Debt ratio)

Debt-to Equity ratio

Interest Coverage ratio (the Times Interest Earned)

b) Write (about) 1 page of the analysis of the ratio results. In your analysis you should answer the following questions. Please explain your answer to each question.

How is THE COMPANY financing its assets? Discuss how much risk is associated with the financial structure the company? How can this risk be measured? Please explain.

-3- Collect and evaluate the data about bond performance of the assigned company. (20% of the project grade).

The information on bonds can be found on the website http://finra-markets.morningstar.com/BondCenter/Default.jsp. To find the information on bonds, click on Search in the middle of the screen (under Market Center Bond Guide), under Quick Search type the Issuer Name and the Symbol, and click SHOW RESULTS.

Another useful website on bond information is https://markets.businessinsider.com/bonds. To find the information on bonds, scroll down the page, type the name of the company in the window under Bond Finder, and click SEARCH.

Important: Copy the quotations of two bonds issued by THE COMPANY (SELECTED BY INSTRUCTOR) that contain the Price. Present these quotations in your project.

What were the last prices of the bonds (listed in the Last Sale column)? Assume that par value of the bond is $1,000. How much the investor will pay for the bond if he/she purchased the bond at the Price listed in the Last Sale column. Show your work in your project.

Assume that par value of the bond is $1,000. Calculate the annual coupon interest payments. Show your work in your project.

Assume that par value of the bond is $1,000. Calculate the current yield of the bonds. Show your work in your project.

How much is the YTM listed in quotations of the bonds (in the Last Sale column – Yield) (no calculations are required for this question?

Write a 1-2 page of the analysis of the bonds. In your analysis you should answer the following questions. Please explain your answer to each question.

If you are going to buy a bond issued by THE COMPANY, which bond would you choose? Why?

Are these bonds callable? If the bonds that you chose are callable (non-callable), will it change your decision to buy them? 

If you are an investor who is looking for a bond to invest in, are you going to buy a bond that you chose? Take a look at the balance sheet and income statement of the company. What data or ratios support your decision to buy this bond or not? You may want to incorporate the results of the Research Project Part 1, as well as the results of the financial leverage ratios to answer this question.