Equity valuation: Verizon & ATT
Verizon vs. AT&T
Research Task: You are instructed to produce a comparative research and equity valuation report on Verizon and AT&T.
REPORT STRUCTURE (in order)
1. Begin with a 1-page executive summary of the most important facts and statistics included in your report. Please include a sampling of data tables and charts that you deem appropriate for the reader.
2. Next: On the second page, start the body of your report with a qualitative discussion comparing Verizon and AT&T (with proper transition to the next section). The length is determined by you. Use tables and charts to better illustrate your discussion.
3. Next, continue with a discussion of your quantitative valuation that includes a summarized and professional presentation of statistical findings from your spreadsheets. Use tables and charts to better illustrate your discussion.
4. Conclude your report with an overall critical assessment of the two companies summarizing arguments made earlier in the report. In the end, discuss which company is the better investment.
You will produce three equity valuations each for Verizon and AT&T. You will find valuation spreadsheet templates uploaded to Blackboard.
1. Dividend Discount Model – discussed and computed in class
2. Comparables Method – discussed and computed in class
3. Discounted Cash Flow Model – discussed and computed in class
Each model or method will generate an intrinsic value for Verizon and AT&T. It is unlikely that the three models will generate the same result for Verizon or for AT&T. You will need to determine which quantitative valuation result provides better information for your qualitative discussion, or whether the range of outcomes is equally meaningful.
You will produce a qualitative report critically analyzing the two companies as direct competitors. Your qualitative analysis should incorporate and reflect your valuation findings. Please understand that you are not providing qualitative commentary to the reader for general information purposes, but as substantiation for your ultimate recommendation in the concluding section of the report. A qualitative report should include a discussion of the following:
1. A comparison of the VZ and AT&T product mix that drives the cash flows used to compute valuations. In other words, educate the reader about the two companies, and in particular how they differ
2. Comparison of historical performance (e.g. stock performance, financial statement performance – maybe include certain accounting ratios)
3. Competitive position, past and expected
4. Strategic outlook for the business, and for corporate earnings (This discussion should match your ultimate report recommendation)
5. Anything else you might deem valuable for equity valuation purposes
Naturally, each of the 5 examples above could be a major report separately. Thus, to avoid manufacturing a monstrous analytical report, you must carefully select only the most important topics for discussion – those that most impact the value of the company.