Provide a recommendation as to whether an investor should buy, sell, or hold the

Question

Provide a recommendation as to whether an investor should buy, sell, or hold the stock of your company compared to the selected competitor. Your recommendation should be supported by an adequate explanation and reference to supporting analysis and ratios.

Target Walmart 1 a. Net Income Total Shareholders 'Investment 2.934.00 page 38 11,709.00 page 39 Net Income Total Shareholders 'Investment 9,862.00 page 33 77,869.00 page 33 Return on Equity 25.06% Return on Equity 12.66% b. Net Income Total Assets 2,934.00 page 38 38,999.00 page 61 Net Income Total Assets 9,862.00 page 33 204,522.00 page 33 Return of Assets 7.52% Return of Assets 4.82 Net Income Weighted Average common so 2,934.00 page 38 550.3 page 35 Net Income Weighted Average common so 9,862.00 page 33 2.995 page 55 Earnings Per Share $5.33 Earnings Per Share $3.29 Net Income Revenue 2,934.00 page 38 71,879.00 page 61 Net Income Revenue 9,862.00 page 33 500,343.00 page 33 Net Profit Margin 4.08% Net Profit Margin 1.97% Total Current Assets Total Current Liabilities 12,564.00 page 37 13,201.00 page 37 Total Current Assets/ Total Current Liabilities 59,664.00 page 57 78,521.00 page 57 Current Ratio 0.95 Current Ratio 0.76 Total Current Assets - Total Inventories 12,564.00 page 37 8.657.00 page 37 Total Current Assets - Total Inventories 59,664.00 page 57 43,783.00 page 57 Total Current Assets - Total Inventories Total Current Liabilities 3,907.00 13,201.00 page 37 Total Current Assets - Total Inventories Total Current Liabilities 15,881.00 78,521.00 page 57 Quick Ratio 0.3 Quick Ratio 0.2 Accounts Recievable Turnover NA Accounts Receivable Turnover NA Cost of Goods Sold Average Inventory (2017+2018)2 51125 8483 Cost of Goods Sold Average Inventory (2017 + 2018)2 377415 43414.5 Inventory Turnover 6.03 Inventory Turnover 8.69 EBIT EBIT Interest 4176 644 15533 2262 Interest Times Interest Earned 6.48 Times Interest Earned 6.87

Explanation / Answer

Conclusion : As the comparision has been done above, it may be recommended that the Target Company is at Favourable Position and Investor can invest in for better returns.

Sl.No. Indicators Target Walmart (Industry Standards) Remarks 1 Return on Equity 25.06% 12.66% ROE is ratio a good indicator of profitability of a company.It is calculated by dividing the Net Profit Available for Equity Share Holders by Shareholders Equity Value.Investor can compare a company with it's industry competitors by it's profitability.In the given case it can be seen the ROE of Target is double than of Walmart's ROE.It's a good positive indicator for Target. 2 Return on Assets 7.52% 4.82% It's an another profitability ratio in line with the previous.It indicates the efficiency of the management in utilising the assets invested by the management for generating profit.It can be seen ROA of Target is increased by 2.70% than of Walmart's ROA.It's a good indicator for the stock of Target as far as the value is concerned. 3 Earning Per Share $5.33 $3.29 EPS is a good sign of effective management.As it can be compared to the industry standard to identify the efficiency.It shows how much money the company is generating for it's each share holding.EPS of Target Is at favourable position than of Walmart. 4 Net Profit Margin 4.08% 1.97% Net Profit Margin is calculated by dividing The Profit after Pref Dividend by Total Revenue.It is one of the most important ratios for analysing the financial health of a company.It's an good indicator for the investors to decide about investing in the stock.Here also NPM of Target is at favourable state. 5 Current Ratio 0.95 0.76 Current Ratio (CR) is calculated by dividing the Current Assets by Current Liabilities. It's the ratio which explains the volume of Current Assets as against the Current Liabilities.Standard Ratio for a Company should be between 1.5 to 3.Here it can be seen the CR of both the companies are less than 1.But the CR of Target is better than that of Walmart. 6 Quick ratio 0.3 0.2 Quick Ratio = (Total CA - Inventories) / CL .Standard QR is 1.Here also QR is less than the Standard QR.But the liquidity position of Target is better than Walmart. 7 Inventory Turnover 6.03 8.69 Inventory Turnover Ratio measures how many times a company sold it's total average inventory dollar amount during a particular year.Here slightly different opinion can be given as the Target Company is having a low Inventory Turnover which indicates poor management of Inventory in comparision with Walmart. 8 Time Interest earned 6.48 6.87 Both the companies are having good Time Interest Earned as Statndard Time Interest Earned should not go under 2.5.Higher Time Interest Earned ratio indicates a favourable position as less of risks to it's Investors and creditors.Here Also Walmart is at best place than Target. 9 Leverage Ratio 2.49 1.68 Normally a Low Debt-Equity Ratio is considered best. But it again depends on type of company.Whether the company is capital intensive or less Capital Intensive Company.Here D/E ratio for Target is greater than Walmart.It may be like the company has taken risks as it has a good expansion opportunity. 10 P/E Ratio 13.26 27.04 P/E ratio shows how much an investor has to pay to earn 1 dollar from a share.It indicates whether the shares are overvalued or undervalued.A lower P/E Ratio always good as the investor has incurr a less amount to earn 1 Dollar for a share of the company.We saw that the EPS of Walmart less than the Target.Though they have also a high P/E ratio than Target.So the Shares of Walmart are highly valued which is baseless to buy.

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.