Financial analysis (3)

How to carry out a stock market analysis

A SHARE PRICE THAT IS CONSITENT WITH FAIR
VALUATION ...

... SHOULD MAKE IT POSSIBLE TO TRACE A STOCK

MARKET HISTORY ...

... THAT IS IN LINE WITH THE FINANCIAL

PERFORMANCE OF THE FIRM ...

... AND ITS DIVIDEND POLICY ...

... MAKING IT POSSIBLE TO “QUALIFY” THE SHARE

PROFILE ...

... AND TO ASSESS ITS CURRENT VALUATION ON THE

BASIS OF THE FIRM’S FUTURE OUTLOOKS
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A SHARE PRICE THAT IS CONSISTENT WITH FAIR

VALUATION ...

•Shareholding base / Free float

•Liquidity / Volumes
•Change in capital (shares issued / outstanding)

... SHOULD MAKE IT POSSIBLE TO TRACE A STOCK

MARKET HISTORY ...
Share price performance or change in market capitalisation:

Over a relevant period

In absolute terms (volatility; possible cycles)
In relative terms (compared with indices, and / or comparable stocks)
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... THAT IS IN LINE WITH THE FINANCIAL

PERFORMANCE OF THE FIRM ...

Change in EPS and other relevant aggregates (Ebitda, Ebit, …)

Change in corresponding "multiples":
-P/E ratio
-EV / Ebitda, EV / Ebit, PBR
Consistency between market evolution / market "multiples" and financial
analysis (profitability / capital structure)
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... MAKING IT POSSIBLE TO “QUALIFY” THE SHARE

PROFILE ...

•Volatility (Beta); correlation to indices

•Possible profile of the share:
-Growth stock?
-High yield / defensive stock?
-Cyclical stock?

...AND TO WORK OUT ITS CURRENT VALUE ON THE

BASIS OF THE FIRM’S FUTURE PROSPECTS

Forecasts for EPS, Ebitda, Ebit… (for example based on analysts’ consensus)
Positioning / signification of current "multiples" compared with these forecasts
Relationship between return expected by the market (kCP) and return on equity
(ROE); impact on current PBR
Possibly, more comprehensive valuation (DCF, comparables, …)