LAP: QS-044

Objectives Demonstrate procedures for assessing a stock’s fundamentals. Demonstrate procedures for assessing a mutual fund’s fundamentals.

Demonstrate procedures for assessing a stock’s fundamentals. Objective

Assessing a Stock’s Fundamentals How it makes moneyHow it makes money How it competesHow it competes How it has performedHow it has performed Company fundamentals

Company Profile Panera offers fresh food products in a “fast casual” environment at retail locations in 35 states. ValueLine  Use reliable sources Hoover’sHoover’s Yahoo! FinanceYahoo! Finance ValueLineValueLine Standard & Poor’sStandard & Poor’s BetterInvestingBetterInvesting  Describe the company, its products, and the industry

Qualitative Factors Product—What is it?Product—What is it? Panera is definitely on top of the latest trends. Management—Who are they?Management—Who are they? The Panera team represents a wide variety of skills, experience, and education.

Competition Leader or follower?Leader or follower? Plans for the futurePlans for the future Panera is a distant second to Starbucks but far ahead of others.

The Numbers Sales growthSales growth EPSEPS Profit marginProfit margin ROEROE PEPE PEGPEG

Sales Growth Two approaches: Over the last five years, sales at Panera have grown at an average of 33.5% per year. GraphingGraphing Calculating and averagingCalculating and averaging

Earnings Per Share (EPS) EPS for Panera’s fiscal year 2004 is 1.25.EPS for Panera’s fiscal year 2004 is Earnings per share increased steadily in the last five years.Earnings per share increased steadily in the last five years. Panera’s sales and earnings growth should produce comparable growth in stock-price appreciation.

Profit Margin Pre-tax profit margin is considered a good measure of management’s performance.Pre-tax profit margin is considered a good measure of management’s performance. Panera between 2000 and 2004? 11.4%, with an upward trend. Interpreted as the amount of each sales dollar left before taxesInterpreted as the amount of each sales dollar left before taxes

Return on Equity Shareholders’ equity is what’s left of a com- pany’s assets once liabilities are subtracted.Shareholders’ equity is what’s left of a com- pany’s assets once liabilities are subtracted. ROE is a great measure of management’s talent for turning equity into more profit.ROE is a great measure of management’s talent for turning equity into more profit. Panera between 2000 and 2004? 12.9%, and improving.

PE & PEG PE tells you at a glance how much investors are willing to pay for each dollar of earnings.PE tells you at a glance how much investors are willing to pay for each dollar of earnings. Panera has a PE of 62.3, and a historical average of Is the stock overvalued? The PEG ratio compares PE to earnings growth to see if investor expectations are supported by actual growth rates.The PEG ratio compares PE to earnings growth to see if investor expectations are supported by actual growth rates. Panera has a PEG of Expectations are high given projected earnings growth.

Demonstrate procedures for assessing a mutual fund’s fundamentals. Objective

Assessing a Mutual Fund’s Fundamentals Prospectus: ObjectiveObjective StrategyStrategy HoldingsHoldings Hartford Growth offers no minimum initial investment and holdings that closely match its objective and strategy.

Assessing a Mutual Fund’s Fundamentals Examine: ManagementManagement Hartford Growth’s fund manager has performed well but has a short track record. CostsCosts Hartford Growth is a no-load fund with a reasonable expense ratio.

What the Numbers Say Quick Case Compared to othersCompared to others Compared to selfCompared to self Combine the two?Combine the two? 6%8%

MarkED Acknowledgments Original Developers Christopher C. Burke, Jane Wright, and Mary C. Hollaway, MarkED Version 1.0 Copyright © 2007 MarkED Resource Center

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