Financial statement analysis and common stock valuation

Common Stock Valuation Ratios
Quarterly Data

Relative valuation technique determine the value of Target Corp. by comparing it to similar entities (like industry or sector) on the basis of several relative ratios that compare its stock price to relevant variables that affect the stock value, such as earnings, book value, and sales.

• Historical Valuation Ratios (Summary)
• Price to Earnings (P/E)
• Price to Operating Profit (P/OP)
• Price to Sales (P/S)
• Price to Book Value (P/BV)

Cash Flow Statement

The cash flow statement provides information about Target Corp. cash receipts and cash payments during an accounting period, showing how these cash flows link the ending cash balance to the beginning balance shown on Target Corp. balance sheet.

Balance Sheet: Liabilities and Stockholders’ Equity
Quarterly Data

The liabilities and stockholders’ equity reports major classes and amounts of external claims on assets and owners’ capital contributions, and other internally generated sources of capital.

Aggregate Accruals

Financial reporting quality relates to the accuracy with which Target Corp. reported financial statements reflect its operating performance and to their usefulness for forecasting future cash flows.
Aggregate accruals deriving measures of the accrual component of Target Corp. earnings.

• Balance-Sheet-Based Accruals Ratio
• Cash-Flow-Statement-Based Accruals Ratio

Analysis of Short-term (Operating) Activity Ratios
Quarterly Data

Evaluates revenues and output generated by the Target Corp. assets. Operating performance ratios describe the relationship between the Target Corp. level of operations and the assets needed to sustain operating activities.

• Short-term Activity Ratios (Summary)
• Inventory Turnover
• Payables Turnover
• Working Capital Turnover
• Average Inventory Processing Period
• Average Payables Payment Period

Common-Size Balance Sheet: Assets
Quarterly Data

Assets components shown as percentage of total assets.

Price to FCFE (P/FCFE)

Free cash flow to equity is the cash flow available to Target Corp. equity holders after all operating expenses, interest, and principal payments have been paid and necessary investments in working and fixed capital have been made.

• Free Cash Flow to Equity (FCFE)
• P to FCFE Ratio, Current
• P to FCFE Ratio, Historical

DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin

An approach to decomposing Target Corp. return on equity, return on assets, and net profit margin ratio as the product of other financial ratios.

• Two-Component Disaggregation of ROE
• Three-Component Disaggregation of ROE
• Five-Component Disaggregation of ROE
• Two-Component Disaggregation of ROA
• Four-Component Disaggregation of ROA
• Disaggregation of Net Profit Margin

Present Value of Free Cash Flow to Equity (FCFE)

The FCFE valuation approach estimates the value of equity as the present value of future FCFE discounted at the required rate of return on equity.

• Intrinsic Stock Value (Valuation Summary)
• Required Rate of Return (r)
• FCFE Growth Rate (g)

Analysis of Profitability Ratios
Quarterly Data

Measures the income of Target Corp. relative to its revenues and invested capital.

• Profitability Ratios (Summary)
• Gross Profit Margin
• Operating Profit Margin
• Net Profit Margin
• Return on Equity (ROE)
• Return on Assets (ROA)

Balance Sheet: Assets
Quarterly Data

The assets reports major classes and amounts of resources owned or controlled by Target Corp..

Analysis of Short-term (Operating) Activity Ratios

Evaluates revenues and output generated by the Target Corp. assets. Operating performance ratios describe the relationship between the Target Corp. level of operations and the assets needed to sustain operating activities.

• Short-term Activity Ratios (Summary)
• Inventory Turnover
• Receivables Turnover
• Payables Turnover
• Working Capital Turnover
• Average Inventory Processing Period
• Average Receivable Collection Period
• Operating Cycle
• Average Payables Payment Period
• Cash Conversion Cycle