TITRE DE

ADVANCED LA
FINANCIAL
PRÉSENTATION
ANALYSIS
Philippe Giraudon ,CIIA
11-14 Nov. 2020
Case study: Relevant ratios and
indicators according to
the investment strategy

© Philippe Giraudon
 Financial Markets ratios, Valuation ratios, Business ratios, Indicators
Relevant ratios and indicators according to the investment strategy
Expected profitability for shareholders
 Case study: Your are financial analyst by Invest fund and you have to define
the management team investment strategy
What are the key specifics of the shares (i.e. of the listed companies), which are
selected by a fund manager in the context of the 3 different investment strategies
listed below? - A value stock is trading at levels that are perceived to be below its fundamentals.
- Common characteristics of value stocks include high dividend yield,
- Low P/B ratio and/or - A low P/E ratio.
1. Value “Value”
- A value stock typically has a bargain-price strategy
as investors see the company as unfavorable in the market
 Value: selection criterion of the stock
 4 key criteria: [To Complete]

2. Growth “Growth” strategy

 “Growth stock”: 5 key criteria: [To Complete]
- Growth stocks are those companies expected to grow sales and earnings at a faster rate than the market average.
- Growth stocks often look expensive, trading at a high P/E ratio, but such valuations could actually be cheap if the company continues to
grow rapidly which will drive the share price up.
- Since investors are paying a high price for a growth stock, based on expectation, if those expectations aren't realized growth stocks can
see dramatic declines. - Growth stocks typically don't pay dividends.
3. Investment “against trends” “Contrariant” strategy
 Examples of indicators: [To Complete]
[Slide #255 of the Material completed together]
© Philippe Giraudon 255
 Contrarian investing is an investment style in which investors purposefully go against prevailing
market trends by selling when others are buying, and buying when most investors are selling.

According to David Dreman, contrarian investor and author of Contrarian Investment Strategies:
The Next Generation, investors overreact to news developments and overprice "hot" stocks and
underestimate the earnings of distressed stocks. This overreaction results in limited upward price
movement and steep falls for stocks that are "hot" and leaves room for the contrarian investor to
choose underpriced stocks.

Contrarian investing is similar to value investing because both value and contrarian investors look
for stocks whose share price is lower than the intrinsic value of the company. Value investors
generally believe that the market overreacts to good and bad news, so they believe that stock price
movements in the short term don’t correspond to a company's long-term fundamentals.

The most prominent example of a contrarian investor is Warren Buffett. "Be fearful when others are
greedy, and greedy when others are fearful" is one of his most famous quotes and sums up his
approach to contrarian investing. At the height of the 2008 financial crisis, when markets were
tumbling amidst a wave of bankruptcy filings, Buffett counseled investors to buy American stocks

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© Philippe Giraudon

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