Writing a Research Report
Produce a research report consisting of no more than
five pages of textual analysis plus supporting documents. Supporting documents, such as tables may include no more than
five more pages. The research
report itself should have the following components, or other subheadings that
include similar information: (You
may include a cover page in addition to the page limits described above. )
including Relative Valuation and Discounted Cash Flow Valuation
Note: Indicate where your data came from. There are
many sources of information about companies, and you are free to use any of them
as long as you properly indicate what you have used. However, passing off
the work of others as your own is plagiarism and is unacceptable in this
competition. You are expected to do
your own analysis.
I suggest that you should be looking at the NYSSA template for guidance (http://pages.stern.nyu.edu/~aim/)
as well as the James Morris research report on
Here is an outline of a complete business plan (from http://www.inc.com/articles/write_biz_plan/18470.html;
originally from BusinessTown.com,
April 18, 2000 issue). This may be something that it may be worthwhile for
the analyst to go through in order to be better able to write a report.
- Business concept
Key success factors
- Vision statement
- Market analysis
- The overall market
Changes in the market
Target market and customers
Customer buying decisions
- Competitive analysis
- Industry overview
Nature of competition
Changes in the industry
Threats and risks
- Key competitive capabilities
Key competitive weaknesses
- Product/service description
Positioning of products/services
Competitive evaluation of products/services
- Marketing and sales
- Marketing strategy
- Key personnel
Human resources plan
- Creating the financials of the business plan
- Assumptions and comments
Starting balance sheet
Cash flow projection
Balance sheet projection
Ratios and analyses
- Suggestions for a Research Report (from New York Times, November 24, 2002,
Sunday, Late Edition - Final, Section 3; Page 1; Column 2; Money and
- All reports must contain a company's balance sheet and show its income and
cash flow for the past two years. They should also include a three-year
projection of earnings, cash flow, capital expenditures and working capital
needs. Subsequent reports should refer to these summaries.
- A stock should be valued based on its excess cash flow, calculated by
taking a company's net earnings and adding its depreciation expense,
deducting capital expenditures and considering changes in working capital.
"Any other metric," Mr. Olstein said, "whether page views,
hidden assets, multiples of revenues, must be converted to excess cash
flow." The cash flow that an analyst projects for future years should
be discounted to reflect that money a company earns today is more valuable
than money it might earn in five years.
- There should be no buy or sell recommendations. Reports should state
whether the stock, based on cash flow projections, is undervalued, fairly
valued or overvalued.
- All reports should state: "Accounting reporting and disclosure
practices at this company have been reviewed and any material deviations in
working capital and liquidity ratios or reporting practices that in the
analyst's opinion are not in accord with economic reality have been
discussed in this or prior reports."
- Earnings estimates should be made annually. Quarterly earnings should be
analyzed only to determine whether they require any change to a stock's
future valuation. "What is critical is not whether a company made the
quarter by a penny or missed by a penny, but whether the quarter has done
anything to change the long-term value of the company," Mr. Olstein
- Analysts should be barred from sending executives advance copies of
reports on their companies.
- Stock price targets should be banned.
- Potential risks to cash-flow forecasts and valuations should be discussed
- When valuing a company, analysts must subtract so-called nonrecurring
write-offs, or charges, from reported operating earnings. "Companies
like to categorize prior accounting assumptions that were overly optimistic
as nonrecurring write-offs," he said. "Analysts should not follow
- Analysts should be rewarded, not punished, for issuing
"overvalued" ratings, when appropriate.
Preparing a Valuation Spreadsheet
Decide which of Damodaran's spreadsheets you want to use.
For each entry, add a comment that indicates where you got it from, and/or
supporting arguments for your choice. Using the comment feature in Excel
allows you to write as much as you wish without running out of space. If
you decide to write your comment in a spreadsheet cell, then make sure you write
it in a different color, so that it stands out from the other material.