The Art of a Stock Pitch: From Understanding a Company to Building a Coherent Logics

Dawn DENG

In this article, Dawn DENG (ESSEC Business School, Global Bachelor in Business Administration (GBBA), Smith-ESSEC Double Degree Program, 2024-2026) offers a practical introduction to building a beginner-friendly stock pitch—from selecting a company you truly understand, to structuring the investment thesis, and translating logic into valuation. The goal is not to produce “perfect numbers,” but to make your reasoning coherent, transparent, and testable.

Why learn to do a stock pitch?

Learning to pitch a stock is learning to tell a story in financial language. Whether you are aiming at investment banking, asset management, or equity research roles—or competing in a student investment fund—the stock pitch is a core exercise that reveals both how you think and how you communicate. Within ten minutes, you must answer three questions: Who is this company? Why is it worth investing in? And how much is it worth? A strong pitch convinces not by breadth of information, but by reasoning that is consistent, evidence-based, and verifiable.

Choosing a company: balance understanding and interest

For beginners, picking the right company matters more than picking the right industry. Do not start by hunting the next “multibagger.” Start with a business you can truly explain: how it makes money, who its customers are, and what drives its costs. Familiar products and clear business models are your best teachers. I first learned how to build a stock pitch during my Investment Banking Preparatory Program at my home university, Queen’s Smith School of Business. The program was designed to train first- and second-year students in the fundamentals of financial modeling, valuation, and investment reasoning. In my first pitch with the audience from school investment clubs and the professor, I chose L3Harris Technologies (NYSE: LHX)—working across defense communications and space systems. Its complexity pushed me to locate it precisely in the value chain: not a weapons maker, but a critical node in command-and-control. No valuation model can substitute that kind of business understanding.

Industry analysis: space, structure, and cycle

The defense sector operates under multi-year budget cycles, long procurement timelines, and high barriers to entry. The market is dominated by five major U.S. contractors—Lockheed Martin, Northrop Grumman, General Dynamics, Raytheon, and L3Harris. While peers tend to focus on platform manufacturing, L3Harris differentiates itself through integrated communication and command systems, giving it recurring revenue and a lighter asset base. This focus positions the company at the intersection of AI-driven defense innovation and space-based data systems—a niche expected to grow rapidly as military operations become more network-centric.

Investment thesis: three key arguments

(1) Strategic Layer – “Why now”

The defense industry is entering a new digitalization cycle. L3Harris’s acquisition of Aerojet Rocketdyne expands its vertical integration into propulsion and guidance, while its strong exposure to secure communication networks aligns with rising defense budgets for AI and satellite modernization.

(2) Competitive Layer – “Why this company”

Compared to peers, L3Harris demonstrates strong operational efficiency and disciplined capital allocation. Its EBITDA margin of ~20% and R&D intensity near 4% of revenue outperform sector averages. Management has proven its ability to sustain synergy realization post-merger, reducing leverage faster than expected.

(3) Financial Layer – “Why it matters”

The company’s robust cash generation supports consistent dividend growth and share repurchases, signaling confidence and financial flexibility. Our base-case target price was USD 287, implying ~12% upside, supported by improving free cash flow yield and moderate multiple expansion.

Valuation: turn logic into numbers

Valuation quantifies your logic. At the beginner level, focus on two complementary methods: Relative Valuation and Absolute Valuation (DCF). The first tells you how markets price similar assets; the second estimates intrinsic value under your assumptions. Use them to cross-check each other.

Relative Valuation

We benchmarked L3Harris Technologies against major U.S. defense peers including Lockheed Martin, Northrop Grumman, and Raytheon Technologies, using EV/EBITDA and P/E multiples as our key comparative metrics. Peers traded at around 14–16× EV/EBITDA, consistent with the industry’s steady cash-flow profile. However, given L3Harris’s stronger growth visibility, improving free cash flow, and synergies expected from the Aerojet Rocketdyne acquisition, we assigned a justified multiple of 17× EV/EBITDA—positioning it slightly above the sector average. This premium reflects not only its operational efficiency but also its role in the ongoing digital transformation of defense communications and space systems.

Absolute Valuation (Discounted Cash Flow)

DCF values the business as the present value of future free cash flows. Build operational drivers in business terms (volume/price, mix, scale effects), then translate into FCF:
FCF = EBIT × (1 – tax rate) + D&A – CapEx – ΔWorking Capital. Choose a WACC consistent with long-term capital structure (equity via CAPM; debt via yield or recent financing, after tax). For terminal value, use a perpetual growth rate aligned with nominal GDP and industry logic, or an exit multiple consistent with your relative valuation. Present a range via sensitivity (WACC, terminal growth, margins, CapEx) rather than a single precise point. Where DCF and multiples converge, your target price gains credibility; where they diverge, explain the source—cycle position, peer distortions, or different long-term assumptions.

Risks and catalysts: define uncertainty

Every pitch must face uncertainty head-on. Map the fragile links in your logic—macro and policy (rates, budgets, regulation), competition and disruption (new entrants, technology shifts), execution and governance (integration, capacity ramp-up, incentives). Then specify catalysts and timing windows: earnings and guidance, major contracts, launches or pricing moves, structural margin inflections, M&A progress, or regulatory milestones. Make it explicit what would validate your thesis and when you would reassess.

Related posts on the SimTrade blog

   ▶ Cornelius HEINTZE Two-Stage Valuation Method: Challenges

   ▶ Andrea ALOSCARI Valuation Methods

   ▶ Jorge KARAM DIB Multiples Valuation Method for Stocks

Useful resources

Mergers & Inquisitions How to Write a Stock Pitch

Training You Stock Pitch en Finance de Marché : définition et méthode

Harvard Business School Understanding the Discounted Cash Flow (DCF) Method

Corporate Finance Institute Types of Valuation Multiples and How to Use Them

About the author

The article was written in October 2025 by Dawn DENG (ESSEC Business School, Global Bachelor in Business Administration (GBBA), Smith-ESSEC Double Degree Program, 2024-2026).

Assessing a Company’s Creditworthiness: Understanding the 5C Framework and Its Practical Applications

Posts

Dawn DENG

In this article, Dawn DENG (ESSEC Business School, Global Bachelor in Business Administration (GBBA), Smith-ESSEC Double Degree Program, 2024-2026) presents a practical framework for assessing a company’s creditworthiness. The analysis integrates both financial and non-financial dimensions of trust, using the classic 5C framework widely adopted in banking and corporate finance.

Why assess creditworthiness

In corporate finance, assessing a company’s creditworthiness lies at the heart of lending, underwriting, and risk management. For banks, it is not only a “yes/no” lending decision (and also the level of interest rate propose to the client); it is a structured way to understand repayment capacity, operating quality, and long-term sustainability. The goal is not to label a company as “good” or “bad,” but to answer three questions: Can it repay? Will it repay? If not, how much can be recovered?

The five pillars of credit analysis: the 5C framework

The 5C framework, an industry standard that crystallized over decades of banking practice and supervisory guidance, assesses five core dimensions: Character, Capacity, Capital, Collateral, and Conditions. Rather than originating from a single author or institution, it emerged progressively across lenders’ credit manuals, central-bank training, and regulator handbooks, and is now embedded in banks’ risk-rating and loan-pricing models. These components are interdependent: strength in one area can mitigate weaknesses in another, while vulnerabilities may compound when several Cs deteriorate at the same time.

The five pillars of credit analysis: the 5C framework.
The five pillars of credit analysis: the 5C framework
Source: the author.

Character: reputation and track record

Character covers the firm’s reputation and willingness to honor obligations. Analysts review borrowing history, repayment behavior, disclosure practices, management integrity, and banking relationships. A consistent record of timely payments and transparent reporting typically earns a stronger credit score.

For example, a mid-sized manufacturer that consistently meets payment deadlines and maintains transparent reporting will typically be viewed as a low-risk borrower, even if its margins are moderate.

Capacity: ability to repay

Capacity assesses whether operating cash flow can service debt on time. Core indicators include: Interest Coverage (EBIT/Interest), DSCR, and Liquidity ratios (Current/Quick/Cash). As a rule of thumb, an interest coverage below 2× or DSCR below 1.0× often signals liquidity pressure.

For example, in 2023, several property developers in China exhibited DSCR levels below 1.0 amid declining sales, illustrating how even profitable firms can face repayment stress when cash inflows weaken.

Capital: structure and leverage

Capital reflects how the company balances debt and equity. Key metrics are Debt-to-Equity, Debt-to-Assets, and Net Debt/EBITDA. Higher leverage raises financial risk, but acceptable ranges are industry-specific: capital-intensive sectors may tolerate 2–3× EBITDA, while asset-light tech/retail often sit closer to 0.5–1.5×.

A practical example: L3Harris Technologies, a U.S. defense contractor, maintains moderate leverage with strong cash conversion, reinforcing its credit profile despite large-scale acquisitions.

Collateral: security and guarantees

Collateral is the lender’s safety net. Recoveries depend on the value and liquidity of pledged assets (property, receivables, equipment). Asset-light firms lack hard collateral and thus rely more on cash-flow quality and relationship history to mitigate risk.

Asset-light companies (e.g., software, consulting) rely more on cash flow and relationship capital rather than tangible assets, making consistent performance crucial to maintaining credit access.

Conditions: macro and industry context

Conditions cover both external factors (interest rates, regulations, economic cycles) and loan-specific purposes.

During tightening monetary cycles, higher financing costs can compress margins, while in recessionary or trade-sensitive sectors, declining demand directly raises default risk. For example, during 2022’s rate hikes, small exporters with floating-rate debt experienced significant declines in credit ratings due to rising interest expenses.

Financial perspective: reading credit signals in the statements

Effective credit analysis connects the three statements: the income statement (profitability), balance sheet (capital structure and asset quality), and cash flow statement (true repayment capacity).

Income statement: focus on revenue stability, margin trends, and the weight of non-recurring items. Persistent declines in gross or operating margins may indicate weakening competitiveness.

Balance sheet: examine asset quality and liability mix. High receivables or inventory build-ups can flag liquidity strain; heavy short-term debt raises refinancing risk.

Cash flow statement: the practical health check. Sustainable, positive operating cash flow that covers interest and capex signals solvency; strong accounting profits with chronically negative cash flow suggest poor earnings quality.

Useful cross-checks include Operating Cash Flow/Total Debt (coverage of principal from operations) and the persistence of negative free cash flow funded by external capital (a sign of structural vulnerability).

Beyond numbers: governance, transparency, and relationship capital

Creditworthiness extends beyond ratios. Governance quality, reporting transparency, competitive barriers, and banking relationships shape real-world risk. Policy-sensitive sectors (e.g., energy, real estate) exhibit higher cyclicality; tech and retail hinge on stable cash generation and customer retention. Stable leadership, prudent accounting, and timely disclosures build lender confidence. Long-standing cooperation and on-time performance often translate into better terms, a compounding of “relationship capital.”

At its core, credit is a form of deferred trust: banks lend to future behaviors and cash flows. Whether a firm deserves that trust depends on how it balances transparency, responsibility, and disciplined execution.

Conclusion

Credit analysis is not merely about numbers, it is about understanding how financial structure, behavioral consistency, and institutional trust interact. The 5C framework provides a structured map, yet effective analysts also recognize the fluid connections among its components: good character supports capital access, strong capacity reinforces collateral confidence, and favorable conditions amplify all others. Assessing creditworthiness is thus the art of finding order amid uncertainty, of determining whether a company can remain stable when markets turn turbulent.

Related posts on the SimTrade blog

About credit risk

   ▶ Jayati WALIA Credit risk

   ▶ Jayati WALIA Quantitative risk management

   ▶ Bijal GANDHI Credit Rating

About professional experiences

   ▶ Snehasish CHINARA My Apprenticeship Experience as Customer Finance & Credit Risk Analyst at Airbus

   ▶ Jayati WALIA My experience as a credit analyst at Amundi Asset Management

   ▶ Aamey MEHTA My experience as a credit analyst at Wells Fargo

Useful resources

Allianz Trade Determining Customer Creditworthiness

Emagia blog Assessing a Company’s Creditworthiness

About the author

The article was written in October 2025 by Dawn DENG (ESSEC Business School, Global Bachelor in Business Administration (GBBA), Smith-ESSEC Double Degree Program, 2024-2026).

The Power of Trust: My Internship Experience in Corporate Restructuring and Charitable Trusts

Dawn DENG

In this article, Dawn DENG (ESSEC Business School, Global Bachelor in Business Administration (GBBA), Smith-ESSEC Double Degree Program, 2024-2026) shares her experience working at a trust company in China, where she contributed to corporate restructuring projects and the design of charitable trusts. She also reflects on how her understanding of the trust system evolved through comparative perspectives between China and Western countries.

About the company

The trust company where I completed my internship is one of China’s long-established financial institutions specializing in trust and asset management services. Trust companies in China operate under the supervision of the China Banking and Insurance Regulatory Commission (CBIRC), bridging the gap between banking, investment, and wealth management. They manage funds on behalf of clients for purposes such as industrial investment, real estate development, wealth management, and charity.

During the past decade, the industry has experienced a transformation—from traditional capital pooling products to more specialized trust structures that emphasize risk control, compliance, and innovation. My department focused on special asset management and structured design, handling complex projects that combined legal, financial, and social objectives.

My internship

My three-month internship provided me with a comprehensive introduction to how trusts operate as both financial tools and institutional mechanisms. I worked with a professional team on multiple projects, including corporate restructuring, charitable trust preparation, and policy research on real estate trust registration pilots.

My missions

My main responsibilities included drafting due-diligence reports, designing trust structure diagrams, preparing presentation slides, and taking minutes during client meetings. I also conducted research on relevant legal and policy frameworks. These tasks allowed me to understand how trust projects are structured, negotiated, and implemented in practice.

Required skills and knowledge

The internship required a blend of hard and soft skills. On the technical side, I used financial analysis, document drafting, and data verification skills for due-diligence work. On the interpersonal side, attention to detail, professionalism, and clear communication were essential—especially when assisting senior managers in client discussions or internal reviews. I also learned how legal reasoning, financial modeling, and policy interpretation intersect within trust projects.

What I learned

This internship deepened my understanding of finance beyond traditional banking. I saw how trust companies play a vital role in restructuring distressed enterprises, supporting social causes, and facilitating wealth transmission. More importantly, I realized that financial tools, when governed by institutional trust and transparency, can become powerful instruments for both growth and social good.

Financial concepts related to my internship

I present below three financial concepts related to my internship experience: corporate restructuring, charitable trust, and real estate trust registration.

Corporate restructuring and the role of trust companies

When a listed company in China enters bankruptcy reorganization, two types of investors often emerge: industrial investors and financial investors. Trust companies serve as the latter, contributing capital and structuring expertise. Their advantages include risk isolation—trust assets are independent of the company’s liabilities—and structural flexibility, as they can design debt-to-equity swaps or securitization solutions. This mechanism allows trust companies to participate in corporate recovery while safeguarding investor interests.

Charitable trust

A charitable trust is a legal arrangement where assets are entrusted to a trustee—typically a trust company—for public-interest purposes such as education, poverty alleviation, or healthcare. Its institutional structure involves a settlor, trustee, custodian, supervisor, and beneficiaries. Compared with direct donations, charitable trusts ensure transparency, efficiency, and sustainability: funds are professionally managed, periodically disclosed, and can generate lawful returns for reinvestment into charity. This system transforms goodwill into an enduring and accountable mechanism.

Real estate trust registration

In 2024–2025, several pilot cities in China launched the “real estate into trust” registration policy. For the first time, individuals could legally transfer real estate into trusts, with ownership certificates marked “trust property.” This policy innovation strengthens property-rights protection and facilitates wealth inheritance, family planning, and eldercare models such as “housing-for-pension.” It also marks a milestone in institutionalizing the trust framework within China’s civil law system.

Why should I be interested in this post?

This post offers ESSEC students a window into one of China’s most dynamic financial innovations. Trusts combine finance, law, and governance—they are both capital structures and instruments of social value. For students interested in corporate finance, asset management, or financial regulation, understanding the trust industry provides a unique perspective on how institutions transform abstract trust into tangible impact.

Related posts on the SimTrade blog

   ▶ Samia DARMELLAH Recent Financial Innovations in China in the 2020s

   ▶ Louis DETALLE A quick presentation of the Restructuring job…

Useful resources

What is meant with Restructuring Trust? (MPT Advisory Group)

What is the ownership of trust property in China? (Nature article)

What Is a Charitable Trust & How Does it Work?

About the author

The article was written in October 2025 by Dawn DENG (ESSEC Business School, Global Bachelor in Business Administration (GBBA), Smith-ESSEC Double Degree Program, 2024-2026).