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Questions

  • Credit Analysis as a framework for Equity Returns
  • Capital Allocation Integration Framework (Part of Series: Future of OpEx profiles & S&P returns: sustaining improvements in profitability)
  • NCL Recommendation
  • China: McKinsey “5-Trillion Opportunity”
  • Why banks are holding excess cash (and implications for Europe)
  • Background: “Vision” for equity theses

Building A Framework for Future Earnings Considerations

To demonstrate “fair” values for equity issues, I’ll elaborate on techniques in credit analysis to identify illustrate the relationships between bond yields and equity yields.

Components

  • Credit Analysis: franchise power (reputation), capital (leverage), earnings power
  • Yield to Maturity: market price, coupon, term to maturity (and here, sketch relative yields for different credit classes & characteristics of each class)

Financial Risk Profile Assessment
(per Standard and Poor’s)

Default Probability
(per HomeProtect.uk)