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