Comparing Two Companies In the Same Industry – Grading Rubric

Students can work in teams to complete this assignment. After logging into PersonalFinanceLab, they can go to the Stock Screener, in the Investing Research section to compare two companies from the same industry. Adjusting the Industry filter, they can compare any companies that trade on the US stock exchange.

For example, students could choose Electronics/Appliances and compare SONY to ROKU or WEBR to GPRO. Once students have the industry, they must pick any 2 ticker symbols and compare their financial positions, analyst ratings and if your class is advanced enough conduct technical analysis on how the companies’ price and share volumes fluctuate over time.

Students will need to justify why they would invest in one company over the other based on the fundamentals of the company. I.E. which one is more likely to succeed based on their past performance? And therefore, which stock is more likely to give them more dependable returns?

Students can use the Quote Research page to get access to SEC filings, financial statements and more to complete the assignment. They can access the information they need for all publicly traded companies by selecting Financial Statements from the left side panel on the Quote page.

Income Statement

  • Students should compare the line EBIT (Earnings Before Income Tax) and EBITDA (Earnings Before Income Tax, Depreciation and Amortization) of both companies, which one is higher and why?
  • Can they see any major differences from one year to the next for one of the companies? If they research company news for that period, was it a global event that caused this change in price? Or did something happen to the company in particular?
    • For example, a change in leadership, or bad publicity after a bad product launch?

Balance Sheet

  • What are the current and non-current liabilities of both companies?
  • Have they gone up more for one company than the other over the last 2-3 years?
  • How much current assets does each company have?
  • If they suddenly had to pay off all their current debts (liabilities) would they have enough “liquid assets” to cover it?
    • I.E. Are the total current assets larger or equal to the current liabilities?
  • How much Retained Earnings does each company have? How much common stock do each have?

Cash Flow Statement

  • When comparing both companies, which company has more extra cash available at the end of each period?
  • Is that amount going up or down over the last 2-3 years?
  • What is the biggest source of incoming cash? Is it from Operating Cash Flow, Investing or Financing?
    • Note: A company in good standing will have most money coming from Operations. 

Next students should consider the industry as a whole and answer the following questions.

  • Is this industry growing or is it established? Explain why or why not.
  • If this is a growing industry, are one or both companies experiencing rapid growth? How much are they investing in Research and Development?
    • Note: they can access this information from the Income Statement under Operating Expense.
  • If this is an established industry, are one or both companies offering dividends? If it is an established industry and the companies are not paying out dividends, why do you think that is? Where is the company investing their money instead?
  • Is it possible the industry is shrinking? If so, how much market share is there available for all the existing companies?
    • I.E. Are there any major changes in technology, regulation or some other global shifts that could put pressure on the industry as a whole?
    • For example, all travel was banned during the COVID-19 crisis impacting the entire tourism industry from hotels, airlines, restaurants to leisure or recreational activities.

Once students have completed their analysis, they should explain which of the two companies they would invest money in. Or why they will invest in neither option based on the industry and how it is currently performing.

Grading Rubric

Needs Improvement (1)Meets Expectations (2)Exceeds Expectations (3)Total Score
CompletenessNot all questions have been answered.All questions have an answer, but some responses may lack full detail.All questions are fully and completely answered.
AccuracySome or all the answers are incorrect.The answers are correct, but the conclusions drawn from them may not be.The answers are correct, and the conclusions drawn from them are logical and actionable.
Style and PresentationAnswers are disorganized and difficult to follow. Numerous spelling/grammar errors.Answers can be understood easily with minimal spelling/grammar errors.Answers are creatively presented in an easy-to-understand format with no spelling/ grammar errors.

Student Packet

Download and distribute the student packet for this activity by clicking the button below!