Target Company
Target Corporation is a retailing corporation in America. It is based in Minneapolis, Minnesota. It was founded in 1902 and is ranked second after Wal-Mart as the biggest retailer in the United States. The company has stretched out its operations to Canada through a subsidiary, and it now operates in close to 100 locations in Canada. The corporation boasts of a large customer base of nearly over 110 million. The company operates stores in Canada, and United States that deal with general merchandise. These include pharmacy, baby care, beauty, cleaning products, personal care among others. Jewelry and clothing accessories for both sexes of all ages are also provided in the stores managed by the corporation. In addition, food for humans and pets are sold in the store. The stores operated by the company are a one stop shopping point as they offer all services. The corporation operates in the retail industry. It was listed in September 1969. It boasts of over 361,000 employees. The share of the company is currently retailing at $57.74.
The current ratio of the firm that indicates the quantity of current assets with respect to the current liabilities is 1.17. This ratio shows that the company is financially healthy, but it needs to improve so as to meet the threshold of meeting its short term liabilities. Firms that attract investors have a positive current ratio and target, therefore, qualifies for attention from any investor. The average collection period of the corporation is 49.75. The corporation is a retail firm, and this average collection period is favorable for the company and the customers, as well. Large scale wholesalers who get supplies from the company have adequate time to sell their products before they can submit the debts to the company. The total asset turnover of the giant corporation is 1.57. This indicates that the company is financially healthy for investments as the revenues match the assets of the company. The return on assets ratio is 6.33. The interpretation is that the net revenues of the firm are higher and favorable when compared to the total assets. The return on equity ratio is 18.52. The profit to earnings’ ratio of the company is currently 13.07. This ratio is of interest to investors as they use it to estimate their returns. It is favorable and, therefore, one can invest in the company. The ratio is expected to grow over the years, and this showcases a growth.
The company pays dividends. In the preceding three years, the dividends were $1.10, $1.32 and $1.58 in 2011, 2012 and 2013 respectively. The dividend payout ratio also increased with increase in dividends.
Colgate- Palmolive Company
Colgate-Palmolive Company is a company based in Manhattan, New York. It is a consumer products company. It offers consumer products to people in many people across the globe. The corporation transacts in the assembly and distribution of private, healthcare and household products. These products provide by the company include detergents, soaps and other products that deal with oral hygiene. The oral hygiene products include toothbrushes and toothpaste. The company has a separate Hills brand that it uses to produce veterinary products. It is a public listed company that was founded way back in 1806. The company has not ceased to exist since then. The industry of operation of the company is a personal healthcare industry. The business has a worker base of roughly 37,000. The company stocks trade in the New York Stock Exchange. The company was listed in March 1930. The stock price of the corporation has experienced tremendous improvement in prices for the past five years and is currently trading at $65.21.
The company’s current ratio is 1.00. The explanation is that the current resources of the business are equal to the current liabilities. A scenario is not a very promising one as the current of the company should be slightly higher than the current liabilities to assist in meeting the short term obligations of the firm. This scenario depicts that not much is left to be idle cash, and this should be corrected. The average collection period is the time that is given to debtors of the company to clear all their debts and is calculated as an average. For Colgate-Palmolive Company, this period is 62.2 days which mean that the company has a credit policy of nearly two months on average.
The company’s total asset turnover ratio is 1.31. This ratio is calculated by dividing the revenue with the total assets’ of the company. This is an efficiency ratio, and since it is positive, the financial health of the company is guaranteed. The return on sales ratio of the company is 12.86. The return on assets’ ratio is calculated by dividing the net income with the total assets of the company. Colgate –Palmolive has a 16.44 return on capital ratio. The interpretation of the ratio is that the net income is approximately sixteen times larger than the assets of the company and thus very favorable. The return on equity that is premeditated by separating the net assets with the equity composition is 99.73. This shoes that the company is financially healthy. The profit to earnings ratio of the company is 25.37. This ratio alerts the investor on how much the common stock pays in returns with respect to the current earnings of the share. The ratio has gradually increased since 2011 to 2013, and this is an indication of a positive trend and profitability. The price to earnings ratio is projected to ascend further in years to come. The company pays dividends.
The dividend per share has improved over the years. Since 2004, the dividend per share has grown from $0.48 to $1.33 in 2013. The payout ratio for dividends has also experienced growth from 41.2% in 2004 to 55.8% in 2013.
IBM Company
IBM stands for International Business Machines. IBM is a corporation based in Armonk, New York. It is a technology and consulting firm that operates in many nations world-wide. The company manufactures both software and hardware components of computers. It is also involved in marketing the products. Moreover, the company provides infrastructure, consulting and hosting services to companies all over the world. The company was founded in 1911. The company operates in the hardware and software industry and also offers consultancy services. The company has 435,000 employees worldwide. Slightly over 100,000 employees are based in the United States. It is ranked among the companies with the largest market capitalization and is among the most profitable. The company has a market capitalization of $184 billion. IBM shares started trading as early as 1915. The stocks have seen an increase in value since their incorporation date and are currently trading at $182.35. The revenue of the company is $99,751 million.
The company’s current ratio is 1.28. The ratio is a positive figure. The interpretation is that the current assets of the corporation are higher than the liabilities. This is a good sign to the investors about the company as it shows that the business can meet its short-term obligations. The total asset turnover is 0.81. The return on sales for the company is 1.88. The business’s return on assets ratio is 14.93. This ratio is premeditated by dividing the net income with the total assets. This ratio is currently positive, and it indicates that the company is financially healthy. The return on equity ratio is got by dividing the remaining income with the equity of the company. IBM Company has a positive return on equity. This is an indication that the earnings of the company are able to finance the equity of the company if it includes any borrowed debt. Currently, the return on equity is 92.76.
The company’s average collection period is 54.89 days. This ensures that all creditors have paid what they owe the company in the period. The profit to earnings’ ratio of the company is currently 10.94. This indicates that the market price of a share is ten times the earnings of a single share. This is critical for the investors who use this ratio to analyze the viability of the share overtime. The current ratio is viable and open for investment.
IBM Company pays dividends to its shareholders. The corporation has distributed a dividend of $2.90, $3.30 and $3.70 per share in 2011, 2012 and 2013 respectively. This is a dividend payout ratio of 22.2, 23.0 and 24.8 of its total earnings. Dividend payment is critical in ensuring the returns of the investors in the company are met over time. In addition, dividend payment attracts potential investors who perceive the company to be well developed and stable.
Google Company
Google incorporation is a company that was incorporated in 2002. Its operations are major on advertising, search, hardware products, as well as operating systems. It is a worldwide technology firm. Online advertising is the chief spring of proceeds for the corporation. The products of the business are tailored in more than fifty nations in the world incorporating close to one hundred different languages. The company sells hardware products from Motorola Company. The company has acquired many more similar companies in the industry of its operations making it command a huge customer base. The company operates in the ever growing technology sector on the internet information providers industry. It has a total of 49,829 full time employees. The company was listed to trade in the NASDAQ in 2004. Its shares are currently retailing at $542.82.
The company’s current ratio is 4.63. The current ratio is a liquidity ratio, and it points out the quotient of short-term assets to short-term liabilities. The investor is interested in a low current ratio as it shows that the assets are working t grow profits. The company’s average collection period is 26.90 days. The total asset turnover ratio for Google Company is 0.58. This ratio depicts the efficiency of the company by analyzing the use of its assets and being a positive figure means that the company is doing good. The return on assets’ ratio is 12.22%. It is a profitability ratio. The ratio indicates the proportion of net income to the total assets. It is a positive that means that the company is financially healthy. The return on equity ratio is 15.58. The proportion is got by dividing the net income with the equity of the firm. It is also a positive and this means that the firm is well funded and stable. The profits to earnings’ ratio of the company is 15.14. This fraction is premeditated by isolating the market price of a stock with the earnings per share. The current ratio depicts that the earnings per share are 15 more times than the current price of the share indicating that the share is currently undervalued. The price to earnings ratio is crucial to all the investors as they use this ratio to analyze whether the stocks of a given company are undervalued or overvalued.
The business has not remunerated its shareholders through dividends despite making huge profits over the years it has been in operation. All the earnings of the company are invested back into the company to enhance growth and profitability. Shareholders are awarded stock splits that make them increase their shares in the company.
Analysis and Conclusion
The Capital asset pricing model (CAPM) ascertains the required return rate in any risky asset. Analysts use the CAPM to decide and calculate the price to pay for a defined stock. The formula is ra = rrf + Ba (rm-rrf); where rff is the risk free charge of return, rm is the marketplace rate of return, and Ba is the beta. The expected rate of return of Google incorporation is 13.57%. The rate of returns and standard deviation is 7.71% and 4.42% respectively. The covariance is 19.88 and beta of 1.02. The rate of return of IBM Company is 4.35% and 4.42% respectively. The covariance is 11.74 and beta of 0.60. The beta is 0.60. This gives the stock a CAPM of 9.30%. The standard deviation and charge of return of Target Corporation are 5.15% and 7.40% respectively. The covariance and beta are 24.83 and 0.94 respectively. The expected rate of return of the stock is 12.77%.
The charge of return and standard deviation of Colgate-Palmolive are 3.85% and 4.42%. The covariance and beta are 8.06 and 0.41. CAPM calculation using these components gives a 7.37% expected return. All these measures agree with the beta of the stocks. If an investor is enthusiastic about investing in these companies, an analysis of the companies using the CAPM is paramount. The order of investment in the four companies under analysis should be guided by the expected returns of stocks.
The best company to invest in is Google Incorporation. The company has a rate of return of 13.57. The second is Target Corporation. The rate of return is 12.77%, and this guarantees steady returns. IBM and Colgate-Palmolive come in third and fourth in that order. The investor should, therefore, major on purchasing the Google Company stocks before choosing stocks of any other company.
References
Colgate-Palmovile. (2014, June 16). NASDAQ. Retrieved June 16, 2014, from http://www.nasdaq.com/symbol/cl/financials?query=ratios: http://www.nasdaq.com
Google Inc. (2014, June 16). Financials and Key Ratios. Retrieved June 16, 2014, from http://financials.morningstar.com/ratios/r.html?t=GOOG: http://financials.morningstar.com/ratios/r.html?t=GOOG
IBM . (2014, June 16). Financial ratios. Retrieved June 16, 2014, from http://www.barchart.com/profile.php?sym=IBM&view=ratios: http://www.barchart.com/profile.php?sym=IBM&view=ratios
Yahoo Finance. (2014, June 16). Target Corporation . Retrieved June 16, 2014, from http://finance.yahoo.com/q/pr?s=tgt: http://finance.yahoo.com
