Investment Analysis and Valuation of Associated Banc-Corp (Other (Not Listed) Sample)

Name of Student Course Code Course Title Date of Submission Investment Summary We project a decline in Associated Banc Corp’s by around 1% from 23.09 to 22.33. To come up with this price, we used two different valuation methods; Discount Dividend Model and Relative Multiple Method. To make a good projection, we looked at the various strategic goals of Associated Banc Corp. The company’s management wants to increase its revenues by attracting more customers. Acquiring new customers will prompt the company to spend more in marketing and R&D which will reduce its short-term profits resulting in reduced share price. In addition to this, Associated Banc Corp has been able to leverage technology to cut off some of its costs. The bank faces a huge risk due to looming economic crises that may reduce its revenue generating ability and therefore cripple its ability to make more profits. The company also faces stiff competition with competitors showing healthier financial health. The company has been suffering due to competition which has resulted to prediction in a fall in its market price in 12 months. The company has to improve its customer loyalty and look for expansion opportunities so as to increase its profitability and therefore growth. Investment Thesis The biggest issue facing the company is declining revenue which means reducing profitability. The company has been experiencing a reduction in its revenue for some time now and it had the largest decline compared to its competitors. The company's weakness is that it lacks a competitive edge to separate it from competitors and has been unable to increase its market share. The company, however shows strength in its strong management and ability to perform well even during financial crises. Looking ahead, the company wants to shift its attention to attracting more customers by employing offensive and defensive marketing strategies to ensure increasing market share. The company will therefore be able to raise more revenue and increase profitability resulting in its price increasing. The company is redirecting money in its marketing department in an effort to attract more customers so as to increase its revenue. This means that in the short term the profitability of the company will decrease and therefore its market price will also decrease. If this strategy works, the company will increase its revenue and therefore its market price will also increase but in the long-term. Valuation The current price of Associated Bank Corp is 23.09. We evaluate the target price of the company by using two different methods which are assigned different weights. The first method is the DDM model and the second method is relative evaluation. The first method is the dividend discount method. In the above method, we estimate the dividends per share from 2022 to 2027 and get the present value of the stage 1 dividends. In the next step we add the present value of stage 1 dividends to the present value of the terminal value to obtain the value per share. Stage 1 Dividends 2022 2023 2024 2025 2026 2027 Dividends per share 0.84 0.882 0.9261 0.972405 1.02102525 1.072076513 Cost of Equity 10% 10% 10% 10% 10% 10% PV of Dividends 0.84 0.882 0.7654 0.7306 0.6974 0.6657 4.5810 The DDM target price gives 16.1194 which is a fall in price from the current price of 23.09 The next method used is the relative valuation method. In the relative valuation method there are two subcategories which are the book value per share and the tangible book value per share. The first method in the valuation method is the book value per share. ...