Ass1_Final vers - Financial Statement Analysis Van Dang 360834 Bao Pham 362683 Thu Dang 545963 Home Assignment#1 Question 1 Analyze the past and

Ass1_Final vers - Financial Statement Analysis Van Dang...

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Financial Statement Analysis 16/9/2015 Van Dang - 360834 Bao Pham - 362683 Home Assignment #1 Thu Dang - 545963 Question 1: Analyze the past and expected future earnings growth of IBM As can be seen from the data provided by the Appendix 1 table, both EPS and DPS of IBM has been increasing throughout the period from 2004 to 2014. However, their growth rates seem to slow down during the past few years, especially EPS growth rate. With regard to stock price, during the last 3 year, IBM stock price has fallen from nearly $200 in 2012-2013 down to less than $150 recently. This has explained the generally decreasing trend of PE. 1 2 3 4 5 6 7 8 9 10 11 Y2015* Y2016* Y2017* 0 5 10 15 20 25 0.00 50.00 100.00 150.00 200.00 250.00 EPS DPS PE Stock price However, the main reason behind the increasing EPS can be largely contributed by an aggressive share buyback program that has been executed by the company. From 2010 to 2015, the company is scheduled spend up to US$50 billion to buy back shares 1 . As of December 30, 2014, IBM had approximately $6.3 billion left remaining from the current share repurchase authorization 2 . The amount of outstanding IBM shares has fallen sharply from 1.228 billion shares at the beginning of 2011 down to only 979.53 million shares as of June 2015 3 . This contract in the number of share has helped to boost up the EPS figures considerably. Moreover, as the total number of share falls, the ownership and control of Warren Buffet on the company increase.
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