Company Analysis: Valuation, Forecasting & Modelling

Globalisation leading to increased penetration of the internet, as well as the opening up of borders are just two of the many reasons that explain the increasing complexity of the business world. As a result, there are now a vast number of resources offering financial and business information. However, the sheer volume of information available has paradoxically made it increasingly difficult to predict what will happen in the future. How do you decide what is relevant, and what isn't? To answer this burning issue, we have designed this course to provide you with a comprehensive and practical range of fundamental analytical and forecasting skills, enabling you to sift through data in an efficient yet thorough way. How will this course assist you? Upon completion of this intensive five day course, you will be able to: Value a company or investment using a variety of tools Use basic financial modelling techniques in Excel Understand discounting concepts, cost of capital and discounted cashflow analysis Compare and contrast the various forecasting and analysis techniques Who Should Attend Investment and Commercial Bankers Financial decision-makers in corporates Management Consultants Financial Analysts General Managers Credit Analysts Accountants Marketing Managers Operations Managers Project Managers
Day 1 Modelling Overview Why create a model. Good modelling practices. Overall structure of the model. Introductory model The three main statements. How they link up together. Completion of small model. The main structure Historic P&L information. Restating historic information. Non-recurring items. Historic B / S information. Non-core assets. Review of initial model for case company. Fixed assets Understanding capital intensity. Maintenance vs expansion Capex. Forecasting overall capex. Calculating depreciation. Day 2 Modelling and ratio analysis Working capital Components of cash and non-cash working capital. Working capital ratios and their interpretation. Forecasting working capital. Associates and investments Accounting for associates and investments. Forecasting associates and investment income. Impact on cash flow and B/S. Equity financing Minority interest- impact on equity financing. Common shareholders- forecasting dividends and retained earnings. Share buy-backs and rights issues. Debt financing Linking cash flow and debt requirements. Different types of debt financing. Leasing vs ownership. – Scenario analysis. – Developing fully flexible scenarios. – Identifying the key variables. Day 3 Comparable company analysis Choosing appropriate comparable companies How the choice of comparables impacts the final valuation. Value drivers: understanding industry dynamics. Main factors affecting selection: size, geography, regulation, customers. Other factors affecting comparability, e.g. free-float, capital structure, corporate finance activity. Equity vs enterprise value multiples Definitions. Calculating EV: core vs non-core, assessing liabilities. Calculating “recurring” earnings. Equity multiples Main multiples: P / E and P / BV. Decomposing P / Es: linking growth, Cost of equity and RoE. Pros and cons of Equity multiples. EV multiples Main EV multiples. Choosing the most relevant multiples. Pros and cons of EV multiples. Implied Valuation. Interpreting results and deriving an implied valuation for the target company. Day 4 DCF and cost of capital Cost of capital Why calculate a cost of capital. The risk / reward trade off. Impact of financial leverage on Value. Market risk vs company specific risk. Accounting for market risk: asset betas. Financial leverage and betas. Equity investors Calculating cost of equity. Estimating the equity risk premium. Debt financing Impact of taxation: the tax shield. Calculating the cost of debt. Weighted Average ost of Capital Market value of debt and equity. Current vs target WACC. DCF Forecasting FCF Length of the explicit forecast period. Cyclical and growth companies. Calculating FCF: recurring vs growth FCF. Appropriate FCF. Forecasting of FCF for case company. Day 5 DCF and overall valuation Terminal value Beyond the initial period. When should FCF be normalised? TV using the perpetuity method. TV using the multiples method. Running sensitivities. Review of initial DCF model. Value drivers Understanding ROCE. Components of capital employed. Decomposing ROCE. Value drivers and DCF. The link between ROCE, growth and WACC. Calculating TV using value drivers- compare with standard DCF. Case study: participants will use the models they have built to analyse the performance of the target company and suggest a target share price.