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Corporate Finance II
Fundamentals of Corporate Finance second edition
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Recommended: Corporate Finance II
Ref: www.infrontanalytics.com
Valuation Methods;
Net Asset Value (NAV)
NAV is the book value of equity.
Net Assets = Total Assets – Total Liabilities = Total Equity (the shareholders’ funds)
(All values are taken from the balance sheet, see appendix.) (Total Non-Current Assets – Other Non-Current Assets) – (Total Current Liabilities + Total Non-Current Liabilities) (66,009 – 46,256 = 19,753 M) ˉ ( 18,547 + 19,188 = 37,735 M)
NAV = $19,753 M - $ 37,735 M
NAV= - $17,982 M
Net Asset Value Per Share (NAVPS)
Net Asset Value ÷ Shares Outstanding, diluted average (Ref: statement of earnings 2017 10k, page 59)
-$17,982 ÷ 1078.5 = - $16.67
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The Valuation Matrix by Aswath Damodaran Ref:http://people.stern.nyu.edu/adamodar/pdfiles/execval/relval.pdf
Ref: http://people.stern.nyu.edu/adamodar/pdfiles/country/relval.pdf
P/E Ratio = Share Price / Earnings per share diluted (TTM)
= 72.90 / 3.62 = 20.14 or
P/ Ratio = Market Cap (M) / Revenue/ E Ratio can be thought of as time taken by WBA to earn back price paid for stock. Current P/E is less expensive than its 5-year average of 22.09.WBA in line with industry, CVS has advantage as P/E is lower, but WBA will have advantage due to imminent growth phase after Rite Aid acquisition. Ref: https://www.infrontanalytics.com/
P/S Ratio = Share Price / Revenue per share
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Price/Book Value = Market Value of Equity/Book Value of Equity.
= 73.08 / (BV per share for quarter ending Nov’17) 26.18
=2.79
The price/book value ratio is the ratio of the MV of equity to BV of equity, i.e., the measure of shareholders’ equity in the balance sheet.
The current P/BV is slightly less than its 5-year average and less than industry. It is indicative of the stock value relative to underlying assets within WBA.
WBA acquisition activity, combined with market raising alarms around possible entry by Amazon into pharmacy industry affect stock price.
PFCF = Share Price/ FCF per share (TTM)
= 73.08/ 5.919
= 12.49
FCF for WBA has reduced significantly due to recent events cited earlier. It is still better than CVS and understandably the diminished Rite Aid Corp.
Wal-Mart is classed as a comparable although it is a drug store chain, it is also a global food retailer which demonstrates that valuation by ratios/multiples is less than relative. Many stocks included in WBA’s industry are not trading on a global scale as it, CVS and Walmart do. This ratio can be misleading as it can
This requirement makes it important to look through a majority of the return ratios, which include return on sales, return on assets, and return on equity. Additionally, investors are also interested in the ratios related to the company’s earnings, such as earnings per share (EPS) and PE ratio. Looking at return on sales, we can see that Wendy’s has a 7.27% return on sales and Bob Evans has a 1.23%, which demonstrates Wendy’s has a higher profit margin. Moreover, Wendys’ return on assets is 2.85% and Bob Evans is 1.58%. Also, Wendy’s and Bob Evan 's have return on equity ratios of 6.66% and 4.30%, respectively. All of these return ratios show that Wendy’s has a better handle on turning working capital into revenue. On the other hand, although Wendy’s return ratios are higher than Bob Evans, Bob Evans has a better performance on earnings per share and PE ratio. This is due to Bob Evans having less common stock share outstanding, which makes their earnings per share and PE ratio higher than Wendy’s. Due to the EPS being higher for Bob Evans, we would recommend that investors look towards Bob
Of the three insurance companies Sun life has the highest profit margin. Meaning it is operating more efficiently and earning more per $1 in sales than its two competitors. Whereas, RBC has the lowest profit margin of the three; which is not favourable. When it comes to days’ sales uncollected, BMO has the highest number of days. This means that it takes more days for BMO to turn its receivables into cash than its two competitors. This is unfavourable compared to RBC’s which has the lowest days’ sales uncollected.
I chose to analyze the third largest retail drugstore chain in the United States, Rite Aid Corporation. I chose to analyze Rite Aid Corp. because our family owns approximately 1200 shares and we have taken quite a loss on our investment. We are in the process of deciding whether or not we should sell our stock. Additionally, my Mother has been a pharmacist at Rite Aid Corp for 11 years and she often pays close attention to the financial stability of the company. We both feel that when you are employed by a corporation, that the corporation should be financially stable. A financially secure employer is one who generally offers better compensation and advancement to its employees.
From the table 3 it is indicated that the current ratio of British Petroleum is higher than one both in the recent financial statements i.e. of 2014 and in the financial statement of previous year i.e. of 2013. In 2013 the current ratio of British Petroleum is 1.33 which indicates that the company has sufficient current assets to satisfy it short term liabilities. However, the current ratio in 2014 is 1.37 (BP Global, 2014) indicating increase and depicting that is in position to satisfy its short term debts. Thus this indicates the strength of company in satisfying its debt.
Ratios for return on assets and return on equity offer support for the loss in stockholders’ equity. Return on assets went from 13.1 in 2000 to 5.1 in 2001 and return on equity dropped from 25.4 in 2000 to 8.7 in 2001. Return on equity represents return on assets divided by the difference of 1 and debts/assets.
On the other hand, LOW’s is lower than Home Depot. Home Depot’s higher P/S ratio means that investors will pay more for every dollar of sales that Home Depot generates. As of the most current P/S ratio, investors will pay $1.60 for every dollar that Home Depot generates in sales. LOW’s current P/S ratio of 1.2 means investors will pay $1.20 for every dollar that LOW generates in sales. This indicates that LOW would be the best value in regards to the P/S ratio.
Wal -Marts' major competitors are the Kroger co. #2 in annual sales, Albertsons' Inc. #3, Safeway,Inc. #4, and Costco Wholesale Group #5. Now even though Wal- Mart is leading the way in total sales the #2 and #3 businesses lead in way with total # of stores. The Kroger Co. has 3,302 with Albertsons at 2,476 stores nationwide. Wal-Marts total sales for that year alone was beating its 2nd place competition alone by more than 80 billion dolla...
Team B's assignment this week was to select two different publicly traded companies in the same industry. The two companies will serve as the basis for subsequent team assignments. The two companies chosen for study are Wal-Mart and Target. This paper will provide an overview of each of the selected companies.
The ratio of 1.7 for the last two years indicates consistency, although a lower number is preferred. As a company produces high value product, this could be a satisfactory ratio. By comparing it to 2011 when a ratio was 2.9, in the last two years a ratio improved
Many employees claim low wages, no benefits, irregular schedules, and unreliable hours as some of the horrible working conditions they have to endure. Walmart employees put together different unions all the time to try and protest or strike about the wages, treatment and anything else that seems to come along with being an employee of Walmart. Walmart does not take well to these unions. Women of Walmart seem to have it the hardest though. As recently as 2013, despite the fact that women account for as much as 57 percent of Walmart’s U.S. workforce, women were paid $1.16 less per hour (Osterndorf). In an article about Walmart and how it treats employees wanting to take sick days, a woman in fear of losing her job at a North Huntingdon Walmart, went back to work even though she had doctors' notes and hospitalization recorded, which were both rejected by her supervisors, to excuse her from work due to a miscarriage. She was worried the she would get fired due to absences so she went back (Abrams). Walmart also does not give out good health care to its employees. There are many claims of Walmart cutting health care for employees or finding the cheapest possible solution for an employee's health care. In 2014, the company cut insurance benefits to its part-time employees (Osterndorf). In a New York Times article about health care called, Walmart to End Health Coverage for 30,000 Part-Time Workers, it stated
...ow valuation has been correctly calculated to show the projected future cash inflow will greater than the present value of the company asset.
Before beginning an analysis of a company it is necessary to have a complete set of financial statements, preferably for the pas few years so that historical trends can be obtained. Ratios are a way for anyone to get an idea of the financial performance of a company by using the information contained in the financial statements. Ratios are grouped into four basic categories, liquidity, activity, profitability, and financial leverage. This document will use a variety of these ratios to analyze the firm, Sample Company, as of December 31,2000.
Any successful business owner or investor is constantly evaluating the performance of the companies they are involved with, comparing historical figures with its industry competitors, and even with successful businesses from other industries. To complete a thorough examination of any company's effectiveness, however, more needs to be looked at than the easily attainable numbers like sales, profits, and total assets. Luckily, there are many well-tested ratios out there that make the task a bit less daunting. Financial ratio analysis helps identify and quantify a company's strengths and weaknesses, evaluate its financial position, and shows potential risks. As with any other form of analysis, financial ratios aren't definitive and their results shouldn't be viewed as the only possibilities. However, when used in conjuncture with various other business evaluation processes, financial ratios are invaluable. By examining Ford Motor Company's financial ratios, along with a few other company factors, this report will give a clear picture of how the company is doing now and should do in the future.
In classified balance sheet categories of assets are: current assets, investments, fixed assets, intangible assets, etc.