• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month
Page
  1. 1
    1
  2. 2
    2
  3. 3
    3
  4. 4
    4
  5. 5
    5
  6. 6
    6
  7. 7
    7
  8. 8
    8
  9. 9
    9
  10. 10
    10
  11. 11
    11
  12. 12
    12
  13. 13
    13
  14. 14
    14

Valuation and Investment Report- Beverage Industry

Extracts from this document...

Introduction

Valuation and Investment Report- Beverage Industry Finance for Managerial Decision Making Workshop # 5 May 1, 2007 Table of Contents Valuation and Investment Report 3 The Coca-Cola Company 3 Valuation Ratios 4 Investment Advice 7 PepsiCo. Inc. 7 Valuation Ratios 8 Investment Advice 9 Cadbury-Schweppes (CSG) 10 Valuation Ratios 10 Investment Advice 11 Conclusion 12 References 14 Valuation and Investment Report Investing, like most other things, requires investors to have a general philosophy about how to do things in order to avoid careless errors. Many people rightly believe when someone buys a share of stock, they are buying a proportional share in a business. As a result, to figure out how much the stock is worth, investors should determine how much the business is worth. Investors generally do this by assessing the company's financials in terms of per-share values to calculate how much the proportional share of the business is worth. This is known as "fundamental" analysis by some, and most who use it view it as the only kind of rational stock analysis. Our purpose is to know both the price and the value of a company's stock. Our goal is to look at The Coca-Cola Company, PepsiCo. and Cadbury Schweppes for their intrinsic value; in other words, what the business would be worth if it were sold tomorrow. We are focused on the liquidation value of a company. This focus differs slightly in what it is what it might be worth if "all of its assets" were sold tomorrow, rather than the company as a whole. However, value can be a very confusing label as the idea of intrinsic value is not specifically limited to the notion of liquidation value. For the purposes of this paper we have focused on the capital market, which is defined as: the broad term for the market where investment products such as stocks and bonds are bought and sold. ...read more.

Middle

Some of the Top 15 Institutional Owners include Bershire Hathaway (200 million shares held), Fidelity Management & Research Company (63.6 million shares held), Vanguard Group (50.5 million shares held), and JP Morgan Fleming Asset Management (24.4 million shares held). Investment Advice The reports are conflicting in regards to whether the investor should buy, sell, or hold this stock. According to results from Barchart.com for expected performance in the next 12 months, Long-term indicators reflect a 33% Sell (Overall average indicates 72% Sell). Reuters Analyst Consensus rates Cola-Cola as a Hold. This has been consistent for the past 15 weeks. Analyst Consensus from MSN MoneyCentral shows a Moderate Buy. Finally, Morningstar's Analyst Opinions state that Coca-Cola's average rating is 2.2 (1 = Buy, 5 = Sell). On our Learning Team we have a current Coca-Cola Company stockholder that feels that holding on to the stock would be the best decision at this time. The stock market is eventually going to recover and no large dips are expected. Since the history of Coca-Cola's stock price has ebbed and flowed along with the market, it would be lucrative to hold on the stock until a much more profitable time to sell comes along. PepsiCo. Inc. (PEP) PepsiCo Inc. remains positive that their EPS (earnings per share) will be consistent with 2004 year end projections. The company is targeting earnings per share to be at least $2.29. Analysts project PepsiCo.'s year end earning per share will be approximately $2.30. Although the company has a positive Beta of .4, it still could use assistance with overall company performance. Since one or more analysts have predicted moderate increases over the next couple of quarters, PepsiCo Inc could increase the Beta to 1.0 which is suggested by stock buyers. Valuation Ratios A company's stock price is divided by its earning per share for a 12 month period to calculate the price earning ratio. ...read more.

Conclusion

This is a good stock for someone wanting to invest long-term without too much risk. Conclusion Valuation ratios or Capital Market Analysis Ratios are used to determine the relative attractiveness of a given stock based on its current price or market capitalization. A variety of benchmarks may be used, the most common of which is the Price/Earnings Ratio (stock price divided by annual earnings of each share of common stock outstanding). We reviewed several different factors, which included: price earnings ratio, earnings per share, dividend yield, and common stock price. Together with evaluating the companies' betas and various other reports we have discovered neither Pepsi nor Coca-Cola are the industry leaders when it comes to this category. According to Hoover's Online Business Information Authority, Cadbury Schweppes has the best valuation ratios, but simply because they focus more of their attention on the confectionary side since they have accepted the fact that they cannot compete with Pepsi and Coca-Cola in the beverage industry. Their valuation ratios show that the company looks like a good investment, if only analyzed on paper. For example, Coca-Cola is a strong company in the beverage industry, but the company's P/E shows the stock is probably overvalued. This can be because whichever organization is closest to the industry (in terms of ratios) is the one that novice investors may perceive to be the best in the industry. If an investor simply judged their decision on the valuation ratios, they would not see the whole picture. They would need to dive deeper into their research possibly combining all the research this Learning Team has done over the past 5 weeks. The investor needs to consider the economy and the companies' abilities to recover after slumps in the economy, the industry as a whole, how their suppliers are doing, and then proceed with looking at financial statements, notes in the financial statements, and ratios. Once obtaining the best overall picture, the investor could make an informed, rational decision on where to place their investments. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Structures, Objectives & External Influences section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Structures, Objectives & External Influences essays

  1. Btec National Business Level 3 Year 1 - Exploring Business Activity

    To receive tax revenue from profitable firms To direct the operations of the business for the benefit of the community/nation To assist the business in accordance with local and national policy Competitors Defeat rival businesses To compete by all lawful means To differentiate its products from those of other business

  2. Free essay

    Business Ethics

    t-shirts, hats, backpacks and other consumer items popular with children and among adults? I believe that this kind of activity is legal to young people, but it is profitable to the company. However its cost the industry little but it enables them to make new customers addictives to their products.

  1. Explain the purpose of keeping accurate financial records.

    * In addition, there is the chance of loosing critical information. This can occur when the computer freezes, which means that the entire or some data will be lost. Also there is the chance that computer viruses may arise and ruin the system which means that the initial data will be lost.

  2. The company that I'm going to investigate is Cadbury Schweppes.

    an unincorporated business - this means that there is no legal difference between the business and the owner. Then Jacob Schweppes in 1790 entered into a partnership to expand the business and establish a factory in London, John Cadbury went into partnership at 1847 with his brother and the family business becomes Cadbury Brothers of Birmingham.

  1. Introduction to J Sainsbury plc

    Individual departments or functions can be very strong and independent, guarding their own power. Roles will be precisely defined, using clear job descriptions and definitions of authority. There are sets ways of communicating, such as standard memos with defined circulation lists and 'usual channels', for example, subordinate to superior and no one else.

  2. This is a detailed business report on Sainbsurys.

    of the business, running costs, liabilities of any outstanding debts, and meeting capital requirements. It is very easy and simple to set up as a sole trader. You need to follow the following steps: * Responsibility for providing capital either from savings or a loan.

  1. Tesco financial review

    setting a good example for competitors and the government understands what Tesco are trying to achieve, they may invest into Tesco to help the environment more or provide more variety of different stock. Every little section would matter to Tesco, as all the big things or small things will allow

  2. Report composed of an interpretation of the ratios for Marks and Spencers and the ...

    some 5% down on the steadily rising gross profit on cost % of Marks and Spencer. PRODUCTIVITY Sales per Employee (�) sales = � No of employees This ratio is useful in measuring the productivity of the employees in a business.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work