Reading 40. Introduction to industry and company analysis
40a. Explain uses of industry analysis and the relationship of industry analysis to company analysis.
industry rotation-overweigh or underweight industries based on current phase of business cycle.
40b. Compare methods by which companies can be grouped, current industry classification systems, and classify a company, given a description of its activities and the classification system.
sector
principal business activity- the largest source of sales or earnings
sensitivity to business cycles
-cyclical and non-cyclical firms
statistical metods
-cluster analysis
缺點：
Industry classification systems
Commercial Classifications
1)basic materials and processing firms produce:
2)consumer discretionary firms are cyclical and sell goods and services in industries
3)customer staples
4)energy firms
5)financial services
6)health care
7)industrial and producer durables firms
8)real estate firms
9)technology firms

10. telecommunications firms
    Government classifications
    1)international standard industrial classification of all economic activities
    2)statistical classification of economic activities in the European community
    3)Australian and new Zealand standard industrial classification
    4)North american industry classification system
    40c. Explain the factors that affect the sensitivity of a company to the business cycle and uses and limitations of industry and company descriptors such as growth, defensive and cyclical.
    cyclical firm
    non-cyclical firm
    defensive industries
    growth industries
    growth cyclical
    40d. Explain how a company's industry classification can be used to identify a potential "peer group" for equity valuation.
    peer group
    40e. Describe the elements that need to be covered in a thorough industry analysis.
    strategic groups
    life-cycle stage
    experience curve
    40f. Describe the principles of strategic analysis of an industry.
    economic profits
    strategic analysis-Porter's
    1)rivalry among existing competitors
    2)threat of entry
    3)threat of substitutes
    4)power of buyers
    5)power of suppliers
    40g.Explain the effects of barriers to entry, industry concentration, industry capacity and market share stability on pricing power and price competition.
    Barriers to entry
    Industry concentration
    Industry capacity
    market share stability
    switching costs
    40h.Describe industry life cycle models, classify an industry as to life cycle stage, and describe limitations of life-cycle concept in forecasting industry performance.
    Industry life cycle
    -embryonic stage/growth stage/ shakeout stage/ mature stage/decline stage
    40i.Compare characteristics of representative industries from the various economic sectors.
    major firms
    barriers to entry and success
    industry concentration
    influence of industry capacity on pricing
    industry stability
    life cycle
    competition
    demographic influences
    government influence
    social influence
    technological influence
    business cycle sensitivity
    40j. Describe macroeconomic, technological, demographic, governmental and social influences on industry growth, profitability and risk.
    40k. Describe the elements that should be covered in a thorough company analysis.
    company analysis
    competitive strategy
    cost leadership(low-cost)strategy
    product or service differentiation strategy
    predatory pricing
    differentiation strategy
    spreadsheet modeling
    41e. Explain the rationale for using present value models to value equity and describe the dividend discount and free-cash-flow-to-euqity models.
    dividend discount model (DDM)
    one-year holding period DDM
    multiple-year holding period DDM
    free cash flow to equity(FCFE)
    Estimating the required return for equity
    41f.Calculate the intrinsic value of non-callable,non-convertible, preferred stock.
    41g. Calculate and interpret the intrinsic value of an equity security based on the Gordon(constant) growth dividend discount model or two-stage dividend discount model, as appropriate.
    Gordon(constant) growth dividend (constant growth model)
    Estimating the growth rate in dividends
    sustainable growth rate
    Multistage dividend growth models
    41h. Identify characteristics of companies for which the constant growth or a multistage dividend discount model is appropriate.
    41i. Explain the rationale for using price multiples to value equity, how the price to earnings multiple relates to fundamentals and the use of multiples based on comparables.
    price multiple
    price multiples based on comparables
    price multiples based on fundamentals
    41j.Calculate and interpret the multiples:
    price to earnings(P/E) ratio
    price to an estimate of operating cash flow
    price to sales(P/S) ratio
    price to book value (P/B) ratio
    price-cash flow(P/CF) ratio
    Multiples based on fundamentals
    justified P/E
    dividend displacement of earnings
    Multiples based on comparables
    law of one price
    41k. Describe enterprise value multiples and their use in estimating equity value.
    Enterprise value(EV)-measure total company value.
    41i. Describe asset-based valuation models and their use in estimating equity value.
    asset-based models
    41m.Explain advantages and disadvantages of each category of valuation model.
    discounted cash flow models
    優點
    缺點
    comparable valuation using price multiples
    優點
    缺點
    price multiple valuations based on fundamentals
    優點
    缺點
    asset-based models
    優點
    缺點