solution - BORAL - Boral Limited 1 Financial Analysis and...

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Boral Limited Financial Analysis Financial Analysis and Stock and Stock Valuation of Valuation of BORAL LIMITED BORAL LIMITED 1
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Boral Limited Executive Summary This report circumferences around the financial analysis and evaluating the stock price of the stock of Boral Limited, Australia with the help of various stock valuation techniques. We have also tried to understand the financial statements of the company. Financial position of the company: Overall if we have a look at the financial position of the firm, we see that the performance is not good at all and the results are not encouraging at all. There is drop in almost each and every area, be it the revenues, the EBDIT or the net profits. It seems that the adverse conditions in the global and Australian markets have taken a beat and has resulted in the declined revenues and profits. But the good part is that the company has managed to book profits despite all the adverse conditions. The only other worrying area is that the total assets have declined which means that there is decline in the earning capacity of the company. The key financial results of the company for 2008/09 are presented as below: Key financial results for 2008/09: • Net reported profit after tax down 42% to $142 million • Underlying profit after tax down 47% to $131 million • Sales revenue down 6% to $4.9 billion • EBITDA down 22% to $539 million – Australian EBITDA down from $657 million to $573 million – USA EBITDA down from A$11 million profit to A$61 million loss – Asia EBITDA up from A$16 million to A$30 million 2
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Boral Limited • EBITDA to sales margin of 11.1% • Underlying earnings per share down 46% to 22.2 cents • Full year fully franked dividend of 13.0 cents Du-Pont Analysis A very good example to measure the efficiency of the management is that of the calculation of Return of Equity (ROE) which can also be calculated and interpreted through Du-Pont analysis. It would also provide an insight in to the element that is responsible for the ROE’s performance. A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are measured at their gross book value rather than at net book value in order to produce a higher return on equity (ROE). It is also known as "DuPont identity". DuPont analysis tells us that ROE is affected by three things: - Operating efficiency, which is measured by profit margin - Asset use efficiency, which is measured by total asset turnover - Financial leverage, which is measured by the equity multiplier ROE = Profit Margin (Profit/Sales) * Total Asset Turnover (Sales/Assets) * Equity Multiplier (Assets/Equity) 3
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Boral Limited 2009 2008 Profit Margin (Profit / Sales) 0.029169 0.04659 Total Asset Turnover (Sales / Assets) 0.887802 0.881849 Equity Multiplier (Assets / Equity) 1.994189 2.026052 ROE 0.051641 0.083242 If we look at the overall ratio, then we observe that except for the total asset turnover, the other two elements of ROE have declined over the year. The profit margins have declined
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This note was uploaded on 05/13/2010 for the course MECH 17657 taught by Professor Ravikant during the Spring '10 term at Indian Institute of Technology, Delhi.

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solution - BORAL - Boral Limited 1 Financial Analysis and...

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