Equity #29: Industry and Comp Analysis Flashcards Preview

2018 Level 2 > Equity #29: Industry and Comp Analysis > Flashcards

Flashcards in Equity #29: Industry and Comp Analysis Deck (10):

What is "growth relative to GDP growth"

growth relative to GDP growth is relationship btwn GDP and company sales estimated.
comp sales = based on future GDP growth


What is "mkt growth and mkt share"

starts with estimate of industry sales (mkt growht) and then comp. sales are estimated as % (mkt share) of industry sales.
comp sales = based on forecasted mkt size * forecasted mkt share


What are operating margins and sales levels like in a comp with economies of scale?

lower costs --> higher operating margins and there is pos correlation btwn sales volumes and margins


DEFINE: Gross interest expense

gross debt + interest rates


DEFINE: Net debt

gross debt - (cash + cash equiv. + short-term securities)


DEFINE: Net interest expense

gross interest expense - (income on cash + short-term debt securities)


FORMULA: forecasted income tax expense

expected effective tax rate * forecasted pretax income


FORMULA: ROIC (return on invested capital)

(NOPLAT)/(invested capital) where NOPLAT is net-op earnings after tax and invested capital is op. assets- op liabilities


Do firms have a competitive advantage in production/sale of their products when ROIC is higher or lower than peers?

when ROIC > peers, company is likely exploiting some competitive advantage


What are porter's 5 forcs?

1. Threat of subs
2. threat of new entrants
3. rivalry
4. bargaining power of buyers
5. bargaining power of customers