Assignment 2: Investment Analysis

Assignment 2: Investment Analysis

To complete this assignment, refer to the scenario from Assignment 1: Investment Selection.

Note: Please include any financial statements or relevant financial information in an appendix.

Write a four to six (4-6) page paper in which you:

  1. Provide a detailed overview of the selected U.S. investment indicating the rationale for your selection and plans for a diversified portfolio.
  2. Select five (5) financial ratios, then analyze the past three (3) years of financial data for the investment (please obtain data from the financial statements or the equivalent).
  3. Analyze the price of the investment to stock market beta for the past five (5) years.
  4. Create a trend line that depicts the price movement for the investment against the market index movement using elements of Microsoft Office, such as Excel, Visio, MS Project, or one of their equivalents (such as Open Project, Dia, and OpenOffice) as appropriate. Note: The graphically depicted solution is not included in the required page length.
  5. Determine the type of person who would be the best candidate for the chosen investment (e.g., the risk adverse investor, an aggressive investor, a broker and a dealer in the market, etc.). Provide a rationale for why this investment is a solid one and support the assertion that someone should invest in this stock.
  6. Use at least five (5) quality academic resources in this assignment. Note: Wikipedia and similar websites do not qualify as academic resources. Visit the Strayer University Library at https://research.strayer.edu.

Your assignment must follow these formatting requirements:

  • This course requires use of new Strayer Writing Standards (SWS). The format is different than other Strayer University courses. Please take a moment to review the SWS documentation for details.
  • Be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides; citations and references must follow SWS or school-specific format. Check with your professor for any additional instructions.
  • Include a cover page containing the title of the assignment, the student’s name, the professor’s name, the course title, and the date. The cover page and the reference page are not included in the required assignment page length.

The specific course learning outcomes associated with this assignment are:

  • Examine common debt and equity securities, and analyze the relative risks and returns associated with each.
  • Analyze how the securities business works through stockbrokers and investment bankers using the physical exchanges, network exchanges, and OTC markets.
  • Perform and interpret basic security analyses using indexes, averages, and various technical methods, as well as compounding, discounting, and forecasting.
  • Propose ways to apply various strategies in the management of financial investment portfolios in order to optimize profits (and minimize taxes) within acceptable risks.
  • Find and utilize sources of pertinent investing information on a company, its industry, the economy as a whole, and the international environment to analyze investment potential.
  • Examine the differences between various investments such as options, convertibles, warrants, rights, and commodities.
  • Illustrate how to use hybrid and derivative instruments such as convertibles, warrants, rights, options, and futures contracts in investment strategies.
  • Use technology and information resources to research issues in investments.
  • Write clearly and concisely about investments using proper writing mechanics.

Running head: INVESTMENT SELECTION 1

INVESTMENT SELECTION 8

Investment Selection

Mereka McKoy

Strayer University FIN 320: Investments Professor: Ahmad Rawish

October 26, 2019

Company profile

The company selected for this assignment is Pfizer pharmaceutical company. Pfizer is an American multinational corporation based in New York, and trades at the NYSE under trade name PFE. The firm has one of the most diversified portfolios in the global healthcare markets ranging from humans to animals. PFE major revenue earner is the sales from the biopharmaceuticals products. Its portfolio comprises of both biologic and molecular drugs, as well as vaccines among other renowned consumables. Some of the chosen firm major competitors include GlaxoSmithKline, Novartis, Sanofi, Biogen Idec, and Genentech among many others (Pfizer Inc., 2019).

Company development truck record

Over the past five years the demand within the industry remains unsteady from the achieved sales and revenue patterns. A similar trend is replicated by the industry whose revenue is unsteady, i.e., increase and decline over the successive years under review. Some of the dominant factors influencing the demand and supply for pharmaceutical products within the sector include political, environmental, social, legal, economic, and technological factors. Other special focus is also placed on the R&D capabilities and the status of managed care and insurer plan within a country, along with other FDA, marketing issues, and the cost of prescription drugs (Ballestero et al., 2019).

However, for PFE some of the significant events that have resulted in decline in revenue were for reasons of expansive rebates from the delayed approval inhibitor Palbociclib (PD-0332991) advancement as a designated chemotherapy drug for breast cancer treatment which was still under FDA evaluation by 2014 (Taylor, 2015). The assumption was that the firm continued to spend on R&D process for chemotherapy drugs whose release to the market were being derailed by FDA regulatory procedures for drug admittance into the market. Also, there were substantial increase in revenue in 2017 following the approval for the use of Prevnar 13 pneumococcal in pneumonia prevention and other invasive diseases prevention for the adult patients in 2017 (Pfizer Inc., 2019).

The decision to invest

To achieve an investment decision, it is critical to evaluate the current year sales revenue, as well as the net earnings to sales revenue and net earnings pattern for the five periods under review. Such can be determined by computing for the annual growth rate in both sales and revenue for the firm within the last five years e.g., where revenue in FY1 is $100 million and FY2 revenue is $125 million then the revenue growth rate will be 25% (Ballestero et al., 2019). Therefore, the earning trend for FPE over the last five years is as follows:

Year 2018 2017 2016 2015 2014
Revenues 53,647 52,546 52,824 48,851 49,605
The percentage (%) change in Rev. 2.1% -0.53% 7.52% 1.14% -4%
Net income 11,153 21,308 7,215 6,960 9,135
The percentage (%) change in Net Inc. -91%% 66.14% 3.53% -31.25% -141%

From the above information revenue and income only increased in FY2016 and the figures remained inconsistent in before that and in the subsequent years. Apparently, the declining trend can be read for the entire industry and it means that the sector is underperforming and any investor should be cautious in investing in the sector and even for the firm in question (Taylor, 2015; Ballestero et al., 2019).

Also, a decision to invest should be approach at from the perspective of gross margins as achievable by the company income statement over the consecutive five-year period under review.

Year Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Gross profit margin 70.16% 78% 78.3% 78.8% 70.16%
Gross Income Growth 2.37% -0.27% 3.29% -1.66%

Again, an observable trend the firm is performing rather poorly as it is not managing its revenue to faster increase its gross margins, further resulting in the construction of its investment results. Factors that may be causing the instability in its gross margins may be due to mismanagement (Taylor, 2015; Pfizer Inc., 2019).

References

Ballestero, E., Pérez-Gladish, B., & Garcia-Bernabeu, A. (2015). Socially responsible investment. A Multi-criteria Decision Making Approach. International Series in Operations Research & Management Science219.

Pfizer Inc. (2019). Pfizer Inc. – AnnualReports.com. Retrieved 1 November 2019, from http://www.annualreports.com/Company/pfizer-inc

Taylor, D. (2015). The pharmaceutical industry and the future of drug development.

Appendices

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