Page 47 - FINAL CFA SLIDES DECEMBER 2018 DAY 13
P. 47
Session Unit 14:
48. Introduction to Industry and company analysis
LOS 48.c: Explain the factors that affect the sensitivity of a company to the business cycle and
the uses and limitations of industry and company descriptors such as “growth,” “defensive,” and
“cyclical.” p.266
“growth,” –mobile telecommunications!
“defensive,” –utilities, food!
and “cyclical.” – agricultural!
tanties
LOS 48.d: Explain how a company’s industry classification can be used to identify a
potential “peer group” for equity valuation., p.267
A peer group will consist of companies with similar business activities, demand drivers, cost structure
drivers, and availability of capital. Key steps:
• Use commercial classification providers to determine which firms are in the same industry.
• Examine firms’ annual reports to see if they identify key competitors.
• Examine competitors’ annual reports to see if other competitors are named.
• Use industry trade publications to identify competitors.
• Confirm that comparable firms have similar sources of sales and earnings, have similar sources of
demand, and are in similar geographic markets.
• Adjust financial statements of non-financial companies for any financing subsidiary data they
include.
