Market value ratios gauge the economic position of a business in the broader market. Market value ratios are important to a publicly traded firm as they provide executives an impression of what the company's stockholders feel of the company's operation and forthcoming projections. Market value ratios assess various methods of examining the comparative worth of a business's stock. If the remainders of the business’ ratios are respectable, then the market value ratios should imitate that and the stock value of the company should be high. One of these ratios is the price earnings ratio (P/E). The Price-Earnings Ratio is an assessment ratio of a business' existing share fee likened to its earnings per share (EPS). It is computed as the market …show more content…
value per share divided by the earnings per share. The P/E ratio can be seen as the quantity of years it takes for the business to get back the amount paid for the stock. A higher P/E implies that stockholders are anticipating greater earnings forthcoming compared to businesses with a lesser P/E. Panera Bread’s P/E ratio for the 2014 fiscal year was 29.1 compare to 2013’s ratio of 25.9.
During the 2014 year, competitors Starbucks Corp. and Chipotle Mexican Grill saw P/E ratios of 29.6 and 41.2 respectfully. The S&P 500 average for 2014 was 18.6 and the industry average was 32.5. Over the last five years, the company’s stocks have traded in the range of 25.9 to 31.2. Panera Bread’s P/E ratio remains marginally under the industry average, but higher than the stock market average represented by the S&P 500. Hence, there is not much variance between the growth potential of Panera Bread contrasted with the …show more content…
industry. A final ratio frequently utilized for evaluation is the market to book ratio.
This ratio is utilized to evaluate the worth of a business by matching the book value of a business to its market worth. Book value is computed by examination of the company's historic value. Market value is established in the stock market. The book to market ratio endeavors to recognize devalued or overrated stocks by dividing the book value by the market value. If the ratio is greater than 1 then the stock is undervalued and if it is below 1 it is overvalued. If a stock is underrated, the cost is predicted to increase and conversely for an overrated stock. A lower ratio could also indicate that there is something amiss within the business. Panera Bread’s market to book ratio for the 2014 fiscal year was 6.6 compared to 2013’s yearend ratio of 7.0. During the 2014 year, Panera Bread’s competitors, Starbucks Corp. and Chipotle Mexican Grill, saw ratios of 12.6 and 9.2 respectfully. Over the last five years, the market to book ratio of Panera Bread had been from 5.2 to 7.0. The S&P 500 average for 2014 was 2.7 and the industry average was 9.6. Panera Bread’s market to book ratio is lower than the industry average, but higher than the stock market average represented by the S&P 500. This implies that the stock may be presently
undervalued. These financial strength indicators of Panera Bread indicate that the company is at acceptable levels. During the 2014 year the business launched new bakery cafes and bakery café sales were up over 2013. The business’ current ratio is comparable to the industry average and the quick ratio is superior to the industry average. Also, the interest coverage ratio is consistent with the industry average. The company did state that operating profit margins and net income were down from a year ago although competitors saw an increase. These decreases are largely tied to investments designed to improve capabilities and future growth. In terms of productivity, the asset turnover ratio and inventory turnover ratio are superior to the industry average. The ROA and the ROE are also similar to the industry average. Panera Bread does fall below the industry average in its P/E ratio, but still performs better than the stock market average. Panera Bread also has above average operating margins and gross margins compared to the industry and equivalent to its rivals. The revenue growth rate of the company is middle of the road when compared to competitors and Panera Bread needs to evaluate ways to increase its growth. Opportunities exist in that the company currently has below average outstanding debt and the stock is currently undervalued. Furthermore, the company earnings have improved by 25.18% over the last five years.
...ense has decreased 82.8% from 2000 to 2004. All the above are contributing factors in Applebee’s achieving higher earnings, a 75% increase in net earnings from 2000 to 2004. Average shares has fall due to consistent share repurchasing programs by Applebee’s. Overall, the common-size analysis of the income statement are relatively consistent over the five years of study. Cost of goods has stayed consistent between 74%-75%, the Depreciation and amortization is between 9%-11%, income from Continue operations and Net Income are also both between 9%-10% in common-size analysis for income Statement. No unusual flutuations has been discovered.
Although I am convinced that Chipotle is a wonderful concept with a proven track record as well as significant brand presence in the US, the return that an investor receives depends on the price paid for the shares, and with respect to that Chipotle doesn’t seem great. There is no doubt that the company has a lot of room for growth, even within the US, however it is likely to face considerable headwinds as it grows larger and larger. In view of such factors, the cons outweigh the pros of the stock.
The fast food restaurant industry, which includes quick-service and fast-casual restaurants, is highly segmented with the top 50 companies accounting for only 25% of the industry’s sales. The $120 billion industry includes over 200,000 restaurants with 50% of those specializing in hamburger entrees. (hoovers.com 2008) The major competitors in the industry include McDonald’s, Burger King, Taco Bell, Subway, and KFC – Chick-fil-A’s major competitor in chicken sales. Chick-fil-A’s unique position in the market, specializing in chicken-based entrées, has lead to a competitive advantage which the company has been able to capitalize on. Recently, many competitors have added chicken entrees in order to compete in the market segment. Through marketing strategies and company initiatives, Chick-fil-A has tried to stay distant from competitors, offering a fresh alternative to the ordinary fast food restaurant.
Some strengths that Panera Bread has over it’s competition is that is provides the high and good quality ingredients to its customers. It also gives these customers a difference dining experience compared to McDonalds and Five Guys just to name two competitors. They have catering, fresh baked goods and quickly prepared foods. They also have a great brand name over the years. They have been able to continue on growing financially over the years. Studies also show that majority of customers are very satisfied with Panera Bread.
The stock price is currently 103.31, down from a recent high of 121.50. The P/E ratio is declining at 28 and beta at .67, which is expected to grow closer to 1.0. A recent earnings surprise last December yielded a 15% difference from the lower expectations and the latest earnings reports late last month also surprised investors. Estimates for the 2000 fiscal year are being raised by a large majority of analyst who believe that earnings per share will increase and the stock price will reach close to 150.
The fourth ratio we will analyze is earnings per share. Earnings per share (EPS) are the number of dollars earned during the period on behalf of each outstanding share of common stock.
The main challenge is to determine how Panera Bread can continue to achieve high growth rates in the future. Panera Bread is operating in an extremely high competitive restaurant market which forces the company to improve and to grow steadily for staying profitable. The company’s mission statement of putting “a loaf of bread in every arm” is just underlying Panera’s commitment for growing. They are now in a good financial situation and facing growth rates of up to 20% per year in a niche market that has a great growth potential. In the next 7 years the fast-casual market is expected to grow by 500% in sales to a total of $30 billion.
The second method we used to analyze the firm’s value was the Comparable Companies Method. We used the historical figures as of 1990 and Goldmans Sach’s Projections. With an average of 22.
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.
The CAPM is the best method of determining the cost of equity for General Mills, inc. (NYSE: GIS). Using CAPM calculations, GIS target for December 2013 is $50.60 (Reuters, 2013). If this security becomes untenable in one year’s time, then the option of increasing dividends to boost investor confidence can be explored. The APT is less accurate compared to the CAPM and the dividend growth models. However, CAPM seems to be the easiest to use. The isolation of the Beta assumptions into a single variable fits the current state of the company best when using the CAPM.
The financial position of a company offers great insight on the performance of the company on short-term and long-term basis. This work argues that Facebook Inc. is a company with a subjective investment portfolio. The purpose of this paper is to use ratio analysis to determine the position of the Facebook as an investment destination. The first section explores two ratios and their implications to a potential investor. The second part evaluates whether Facebook is bankrupt. The succeeding section offers advice to potential investors. The work culminates by highlighting key points and making necessary recommendations.
Ratios traditionally measure the most important factors such as liquidity, solvency and profitability, as well as other measures of solvency. Different studies have found various ratios to be the most efficient indicators of solvency. Studies of ratio analysis began in the 1930’s, with several studies of the concluding that firms with the potential to file bankruptcy all exhibited different ratios than those companies that were financially sound.
The large increase of the Tesla’s stock price was far exceeded normal market fundamental and explanation. Elon Musk, Tesla CEO told CNBC back in September 2014 that he believed Tesla’s shares were overvalued, “I do think people sometimes get carried away with our stock.” According to Nasdaq.com the consensus earnings per share of the company for 2016 is 1.61 per share, which make the Tesla’s stock price to earnings ratio at nearly 133 times compare to Ford Motor at 11 times. Facebook is also a growth company but has a price to earnings ratio at 43 times. However, it is difficult to value a growth company like Tesla based on price to earnings ratio alone because so much of the company's value is resulting from the expectation of future
Johnson & Johnson (J&J) has been important producer of consumer products for 125 years. The last 10 years have seen its stock create a 4.0 % return on investment, whereas the number generated for the S&P 500 is 1.4 % (Johnson & Johnson, 2012). J&J knows that keeping a pulse on the global consumer market is key to achieving profitable results in the marketplace. Despite recent struggles with several high pr...
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.