Assignment 15 - 3 Stock Market Financial Analysis PDF

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Stock Market 1. Using FINVIZ, identify three stocks that you would like to buy. 2. Conduct a financial analysis for each company: 1. Access Yahoo-Finance and select the financial statements for each company. 2. Complete a financial analysis spreadsheet for each company. 3. Review the information available on Yahoo finance. 4. Attach a one paragraph analysis for each company (using the financial analysis data from “b” above and other Yahoo Finance info) indicating why you would buy stock in the company. 5. List the following: Company

Stock Symbol

Purchase Price

Acme United Corporation

ACU

$24.59

American Railcar Industries

ARII

$47.19

China Cord Blood Corporation

CO

$5.88

Acme United Corporation The current ratio decreased a lot for 2013 to 2014 from 5.77 to 3.74 but came up to 5 in 2015. The industry average is 1.19 so since Acme exceeds the industry standard, there really isn’t much concern about liquidity relative to their competitors. The debt to equity ratio increased slightly and then decreased and was 0.89 in 2015. Since the industry average is 0.76, Acme exceeds the average so they have high financial leverage. The gross margin has increased steadily and was 36% in 2015 which is about 10% lower than the industry average of 55.31%. The operating profit margin increased from 6.6% to 6.9% and then came down slightly to 6.7%. The net margin has been about the same over the three years at 4.5%. The industry average for operating profit is 20.28% and the industry average for net margin is 6.46%. Acme falls below the industry average in both areas so they may have slight issues with operating the business. The earnings quality has been steadily decreasing so that isn’t really that good. The return on assets has remained very steady at 5.9% over all three years. Industry average is 7.85% which is slightly higher compared to Acme. The return on investment increased a lot from 11.4% in 2013 to 12.1% in 2014 and then decreased to 11.1% for 2015. Considering the industry average is 14.72%, Acme is not extremely efficient. The inventory turnover remained at a constant of 2 for all three years. The industry average is about 5 which is actually not very good since they only sell their inventory 2 times in a year. The Inventory turnover days were about 175 in 2013 and 2014 but then increased to about 182 days in 2015. The accounts receivable turnover decreased slightly from 2013 to 2014 and then increased to 5.5 days in 2015. The industry average is about 10 days which is good for Acme because

it means they take a shorter amount of time to receive payment. The accounts receivable turnover days were steady for all three years at about 65 days. The accounts payable turnover decreased from 5.85 in 2013 to 4.49 in 2014 and then increased to 5.89 in 2015. The average payment period increased a lot from 62 to 80 and then came back down to 61. Even though there is no industry average for the last two, Acme’s 5.89 days of paying back debt is still very efficient but the average payment period isn’t that great because it takes about 61 days to pay Accounts Payable. I would say that of all three years, 2014 was probably their best year. Although they didn’t come out above all the industry averages, they were very close. I also think they could bring their numbers back up and are still a good company to purchase stock in.

American Railcar Industries The current ratio decreased a little over one point from 2.53 to 1.49 and then came back up to 2.48. The industry average is 1.43 so since American Railcar exceeds the industry standard, there really isn’t any concern regarding liquidity relative to their competitors. The debt to equity ratio increased gradually from 0.90 in 2013 to 1.41 in 2014 and then 1.85 in 2015. Since the industry average is 0.41, American Railcar exceeds the average so they have high financial leverage. The gross margin, operating profit margin, and net margin all increased steadily. The gross margin has increased from 23.8% in 2013 to 29% in 2015. The operating profit margin increased from 20.1% to 25.5%. The net margin increased from 11.6% to 15%. The industry averages are 77.47%, 29.02%, and 18.34%, respectively so although there were some significant increases, American Railcar still didn’t meet all the industry averages meaning they may have some issues operating the business. The earnings quality decreased from 1.90 to 1.37 and then increased to 1.98 which is good. The return on assets decreased from 10.5% to 8.3% and then increased slightly to 8.7%. Industry average is 5.45% which is lower compared to American Railcar so they are very profitable. The return on investment increased a tiny bit at first from 20% to 20.1% and then increased to 24.9% in 2015. Considering the industry average is 6.19%, they are extremely efficient. The inventory turnover decreased from 6 to 5 in 2013 and 2014 and then increased to 7 in 2015. The industry average is about 6 which is actually very good for American Railcar because it means they can sell their inventory 7 times in a year. The Inventory turnover days were about 57 in 2013, increased to 79 2014 but then decreased to about 55 days in 2015. The accounts receivable turnover decreased a lot from 15.14 to 6.77 and then increased to 21.44 days in 2015. The industry average is about 13 days which is bad for American Railcar because it means they take a longer amount of time to receive payment. The accounts receivable turnover days increased from 24 to 53 and then decreased a lot to 17. The accounts payable turnover decreased from 7.38 in 2013 to 4.92 in 2014 and then increased to 10.83 in 2015. The average payment period increased a lot from 49 to 73 and then came back down to 33. Even though there is no industry average for the last two, American Railcar’s 11-day average of paying back debt is okay and the average payment period is pretty great because it takes about a month to pay Accounts Payable. American railcar exceeds almost all of the industry averages so I think they are a great company to purchase stock in.

China Cord Blood Corporation The current ratio steadily increased from 5.18 in 2014 to 6.84 in 2016. The industry average is 1.19 so since China Cord exceeds the industry standard, there really isn’t much concern about liquidity relative to their competitors. Unfortunately, the equity wasn’t listed on yahoo so I used the CSI website to determine the debt to equity ratio which was 0.57 and the industry average was 0.07 so they exceed the average and have high financial leverage. The gross margin, operating profit margin, and net margin have all decreased steadily. Gross margin dropped from 81.5% in 2014 to 78.1% in 2016. Operating profit margin decreased from 40.5% to 28.8%. Net margin decreased from 23% to 13.7%. The industry averages are 47.05%, 12.37%, and 7.63%, respectively so although there were some significant decreases, China Cord still exceeds the industry averages meaning they won’t have any issues operating the business. The earnings quality has been steadily increasing which is really good. The return on assets has been decreasing from 3.6% to 1.9%. Industry average is 3.33% which is lower compared to China Cord. Since the equity wasn’t listed, once again I had to refer to the CSI website for the return on investment. ROI was 2.37%. Considering the industry average is 7.05%, Acme is not extremely efficient. The inventory turnover began at 3 and then increased for 2015 and 2016 to 5. The industry average is very high at about 43 which is not that good for China Cord because they can only sell their inventory 5 times a year. The Inventory turnover days were about 108 in 2014, then decreased to 66 and increased to 69 in 2016. The accounts receivable turnover decreased slightly from 5.12 to 5.02. The industry average is 5.18 days which is about the same as China Cord so they are on track for receiving payment. The accounts receivable turnover days increased by one each year and was 72 in 2016. The accounts payable turnover increased from 3.31 in 2014 to 3.97 in 2015 and then decreased to 2.16 in 2016. The average payment period decreased slightly at first for 109 to 91 and then increased a lot to 166 in 2016. Even though there is no industry average for the last two, China Cord’s average of 3 days of paying back debt extremely efficient but the average payment period isn’t that great because it takes about 166 days to pay Accounts Payable for 2016. Overall, China Cord did really well so I think they are a good company to purchase stock in....