Investment: Evaluation of Stocks and Fundamental Analysis

This document provides a detailed analysis of the Australian Securities Exchange (ASX) to develop a robust portfolio. The portfolio must have a balanced combination between growth and value stocks to ensure maximum possible return to the portfolio holder / holders. Fundamental analysis of these stocks along with technical evolution on the expected returns from the stocks shall be provided in the document to understand the recommendations and justifications behind selection of particulars stocks.

Running head: INVESTMENT
Investment
Name of the Student:
Name of the University:
Authors Note:

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INVESTMENT
Contents
Introduction:....................................................................................................................................2
Evaluation of stocks:........................................................................................................................2
Fundamental analysis:.................................................................................................................3
Technical analysis:.....................................................................................................................23
Du Pont Analysis:......................................................................................................................28
Conclusion:....................................................................................................................................36
References:....................................................................................................................................37

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Introduction:
The objective of the assessment is to find a suitable combination of stocks of companies
listed in Australian Securities Exchange (ASX) to develop a robust portfolio. The portfolio must
have a balanced combination between growth and value stocks to ensure maximum possible
return to the portfolio holder / holders. Fundamental analysis of these stocks along with technical
evolution on the expected returns from the stocks shall be provided in the document to
understand the recommendations and justifications behind selection of particulars stocks. Based
on the historic returns and expected growth of selected 9 stocks the weightage of different stocks
in the portfolio shall be decided to maximize the return and growth from the portfolio.
Evaluation of stocks:
The stocks shall be selected on the basis of industrial and economic growth in the
country. Often it has been seen that a particular industry in a country has more potential of
growth in comparison to other industry or industries in the country. In Australia, Banking,
mining and materials, energy, consumer staples and telecommunication industry have huge
potential of growth and has grown extensively over the years as compared other industries.
Effective Government rules and regulations have led to the immense growth of these industries
as compared to other industry (Weber, Alfen, and Staub-Bisang, 2016). The increased amount of
government regulations and political interference in many countries have restricted the growth of
the Banking industry in those countries whereas Australia has always been a country with strong
banking industry. Thus, in selecting stocks for the portfolio in this document, the industry and
economic growths attached to the industries have been in mind. It is important to conduct a
detailed analysis, both fundamental and technical, before taking investment decisions to
minimize the risk of incurring loss on investments (Liu, Zhang and Tang, 2015). Hence, a

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portfolio must be created after adequate calculation to reduce the risk of losses from such
portfolio. As already measured that the portfolio shall be mainly divided into two components,
value and growth components. Accordingly, the following nine stocks have been selected for the
portfolio purpose.
Value components in the portfolio` Growth components in the portfolio
BHP Billiton Limited (BHP) Bellamy’s Australia Limited (Bellamy)
Commonwealth Bank (Commonwealth) Altium Limited
Woolworths Group Ltd (Woolworths)
Flight Centre Travel Group Limited (Flight
Centre)
Wesfarmers Ltd (Wesfarmers) A2 Milk Company (A2)
Telstra Corporation (Telstra)
Fundamental analysis:
Fundamental facts and information are provided by The Thomson Reuters Eikon online.
Taking into consideration the financial performance and other aspects of the above nine stocks a
detailed discussion shall be made to evaluate the recommendations made by the Thomson
Reuters Eikon online.

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Figure: Peer Analysis of Few of the selected stocks.
(Source: Apac1.apps.cp.thomsonreuters.com 2018)
Fundamental analysis is the analysis conducted on the basis performance yardsticks of different
companies. In this case, the fundamental analysis of the 9 stocks shall include analysing the
dividend yield of these stocks, return on capital employed or equity, gross profit margin, net
profit margin, solvency position, liquidity position of the companies and the expected growth in
the future (Jehiel, 2018). The fundamental analysis shall indicate how the companies have
performed over the years and the expected growth of these companies in the future. Analysing
the profitability position of the companies over the years would be helpful in assessing the ability
of these companies to earn profit from their business operations (Maillet, Tokpavi and Vaucher,
2015). Based on the past performances and trends in the market the expected future
performances of these companies can be measured with substantial reliability.
BHP Billiton Limited:
One of the largest mining companies in all across the globe, BHP Billiton Limited is an Anglo-
Australian company. In terms of market capitalization it is one of the largest mining companies
in the world. In order to provide relative strength and to diversify the portfolio, investment in
BHP Billiton should be considered after evaluating its performance in last few years (Wadhwa,
Phelps and Kotha, 2016).

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BHP Billiton Ltd
Except per share items all amounts are in $' million
2013-06 2014-06 2015-06 2016-06 2017-06 2018-06
Gross revenue 53,860.
00
56,762.
00
44,636.
00
28,567.
00
36,135.
00
43,638.
00
Gross profit % 68.
90
75
.30
72.
50
66.
30
76.
30
75.
00
Operating
profit
19,702.
00
21,437.
00
11,684.
00
4,941.
00
12,578.
00
16,089.
00
Operating
profit %
36.
60
37
.80
26.
20
17.
30
34.
80
36.
90
Net profit 11,223.
00
13,832.
00
1,910.
00
(6,385.0
0)
5,890.
00
3,705.
00
EPS 2.
10
2
.59
0.
35
(1.
20)
1.
10
0.
69
Dividend per
share
1.
13
1
.15
1.
24
0.
78
0.
55
0.
96

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Despite being one of the largest mining companies in the world, the ability of the company to
perform efficiently is clearly visible in the table above. The gross revenue line in the chart below
indicates that the company is very stable in its business life cycle.
2013-06 2014-06 2015-06 2016-06 2017-06 2018-06
-
10,000.00
20,000.00
30,000.00
40,000.00
50,000.00
60,000.00
Revenue and operating profit
Gross revenue Operating profit
There has been slight ups and downs in revenue and operating profit which is quite
understandable considering the size and scope of operations of the company. The net profit line
of the company as can be seen in the chart below once dropped to negatives has again recover to
indicate the strengths of the company in earning profit from business.

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2013-06 2014-06 2015-06 2016-06 2017-06 2018-06
(10,000.00)
(5,000.00)
-
5,000.00
10,000.00
15,000.00
20,000.00
Net profit
Recommendation: Holding the shares of the company will increase the strength of the portfolio.
Commonwealth Bank:
Commonwealth Bank
Amounts are in $'million
2013-06 2014-06 2015-06 2016-06 2017-06 2018-06
Revenue 21,389.
00
22,873.
00
23,805.
00
24,225.
00
25,089.
00
25,630.
00
Net income 7,677.
00
8,631.
00
9,063.
00
9,227.
00
9,928.
00
9,329.
00
EPS 4 5 5 5 5 5

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.62 .19 .29 .29 .59 .17
Dividend per share 1
.64
3
.92
3
.99
4
.32
4
.22
4
.24
Gross Margin 30
.83
30
.67
30
.94
31
.85
30
.86
29
.18
Earnings before tax
margin
37
.87
40
.44
39
.93
39
.88
42
.59
53
.09
Commonwealth has continuously managed as sustainable growth over the last 10 years, the
information in the table contains only of last 6 years. Thus, the bank is a prime entity to invest
one’s money. The following graph clearly explains the ability of the bank to keep on growing
despite huge competition in the banking industry (Kolm, Tütüncü and Fabozzi, 2014).
2013-06 2014-06 2015-06 2016-06 2017-06 2018-06
-
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
Revenue and profits
Revenue Net income

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The ever growing EPS and dividend per share of the bank is another important factor that would
inspire investors to invest on the stock of the company.
1 2 3 4 5 6
-
1.00
2.00
3.00
4.00
5.00
6.00
EPS and Dividend
EPS Dividend per share 2013-06
Recommendation: To invest in the shares of the bank by buying additional shares.
Woolworths Group:
The table below contains important financial data about the performance of the company since
2013.
Woolworths Group Ltd
All amounts are in $' millions
2013-06 2014-06 2015-06 2016-06 2017-06 2018-06
Gross Revenue 58,674 60,952 60,868 58,276 55,668 56,965
Gross Margin % 26.9 27 27.1 26.8 28.6 29.3

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Net Income 2,259 2,451 2,146 -1,234 1,534 1,724
Earnings Per Share AUD 1.82 1.95 1.7 -0.98 1.19 1.32
Dividends AUD 1.29 1.36 1.39 1.16 0.67 0.93
The company has more or less managed to hold on to its market share and have paid dividend to
the shareholders without failing a year. There is definitely room for improvement in the
performance however, the company’s robust performance over the years makes it one of the
companies to keep in mind while investing (Zeng, Li and Gu, 2016).
The ever improving gross margin of the company along with its regularity in paying dividends to
the shareholders are certainly two key aspects to be kept in mind.
Recommendation: The investors should hold on to the investment made in the company.
Wesfarmers Limited:
Again the financial information about the company in the table below will explain how the
company has performed over the years to decide the future course of action in relation to buy,
hold or dispose of the shares of the company (Berutich et. al. 2016).
Wesfarmers Ltd
All amounts are in $' millions except per share amount
2013- 2014- 2015- 2016- 2017- 2018-

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06 06 06 06 06 06
Gross Revenue 59,422 59,893 62,102 65,512 68,015 66,594
Gross profit margin % 33.3 30.8 30.7 30.5 31.8 31.3
Operating profit 4,043 4,080 4,162 3,778 4,683 4,570
Operating Margin % 6.8 6.8 6.7 5.8 6.9 6.9
Net Income 2,261 2,689 2,440 407 2,873 1,197
Earnings Per Share 2.02 2.38 2.16 0.36 2.54 1.06
Dividends 1.77 1.93 2.21 2.02 1.98 2.23
2013-06 2014-06 2015-06 2016-06 2017-06 2018-06
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
Revenue and profit
Gross Revenue Operating profit

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Constant growth in the amount of revenue of the company is a clear indication of the ability of
the company to contribute to the growth to a portfolio consisting of the shares of Wesfarmers
Limited.
2013-06 2014-06 2015-06 2016-06 2017-06 2018-06
0
0.5
1
1.5
2
2.5
3
EPS and dividend
Earnings Per Share Dividends
The company despite suffering slight decline in earnings per share (EPS), clear from the above
linear graph, has maintained its constant growth in dividend each year barring 2017. Thus, it is
recommended to hold on to the shares of the companies (Aziz et. al. 2016).
Recommendation: Hold on to the shares of the company.
Flight Centre Travel Group Limited:
A rapidly growing company in Australia Flight Centre has its shares listed in the ASX. Talking a
look at the information below about the performance of the company since 2013 lets recommend
the course of action with regards to the shares of the company (Hoesli and MacGregor, 2014).
Flight Centre Travel Group Ltd

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Except per share data all amounts are in $' millions
2013-
06
2014-
06
2015-
06
2016-
06
2017-
06
2018-
06
Revenue AUD
Mil
1,945.
00
2,207.
00
2,363.
00
2,625.
00
2,544.
00
2,921.
00
Gross Margin % 100.
00
100.
00
100.
00
100.
00
100.
00
95.
60
Operating profit 352.
00
429.
00
403.
00
407.
00
300.
00
466.
00
Operating
Margin %
18
.10
19.
40
17.
00
15
.50
11.
80
16.
00
Net profit 246.
00
207.
00
257.
00
245.
00
231.
00
263.
00
Earnings Per
Share
2
.44
2.
06
2.
54
2
.42
2.
28
2.
59
Dividends 0.
55
2.
17
1
.99
1.
96
1.
54
Considering the information provided about the performance of Flight Centre, it is pretty clear
that the company is in its growing stage thus, there would be no better to invest in the shares of

14
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the company but now. The chart below explains how the company has grown over the years
(Ilin, Koposov and Levina, 2014).
2013-06 2014-06 2015-06 2016-06 2017-06 2018-06
-
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
Revenue and profits
Revenue AUD Mil Operating profit Net profit
The significant growth in the revenue of the company and its profits are all indicating towards
increasing the investment in the shares of the company (Beck et. al. 2017). The investors would
especially be eager to invest in the shares of the company as the company has managed
sustainable growth in earnings per share and dividend per share since 2013 as can be seen in the
linear graph below.

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1 2 3 4 5 6
-
0.50
1.00
1.50
2.00
2.50
3.00
EPS and dividend per share
Earnings Per Share Dividends 2013-06
Recommendation: Additional shares of Flight Centre to be brought to improve the growth and
return of the overall portfolio.
A2 Milk Company Limited:
Listed in ASX 200, A2 Milk commercializes intellectual properties in relation to the A2 Milk. In
Australia and New Zealand, the company is one of most rapidly growing companies. Taking into
consideration the financial performances of the company over the years, recommendation is
provided below (Chandra, 2017).
A2 Milk Co Ltd
Except per share data all amounts are in NZ $' million
2013-
06
2014-
06
2015-
06
2016-
06
2017-
06
2018-
06

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Gross revenue 9
4.00
111.
00
155.
00
353.
00
549.
00
922.
00
Gross Profit Margin
%
3
5.70
36
.00
100.
00
42
.80
48
.00
50
.30
Operating profit
8.00
12
.00
9
.00
76
.00
139.
00
302.
00
Operating profit
Margin % 8.70
11
.10
5
.80
21
.40
25
.40
32
.80
Net profit
4.00 -
(2.
00)
30
.00
91
.00
196.
00
EPS
0.01
0
.04
0
.12
0
.26
Gross revenue of the company has grown each year at a significant pace. The linear graph below
clearly show the increasing trend of revenue that the company has managed for number years
(Matiin, Ratnawati and Riyadi, 2018).

17
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2013-06 2014-06 2015-06 2016-06 2017-06 2018-06
-
100.00
200.00
300.00
400.00
500.00
600.00
700.00
800.00
900.00
1,000.00
Gross revenue
The line clearly suggests that the gross revenue of the company has continuously increased. This
is a clear indication that the company is performing exceptionally well in the market. Along with
gross revenue of the company, the net profit of the company has also increased in each year
(Gliedt and Hoicka, 2015).
2013-06 2014-06 2015-06 2016-06 2017-06 2018-06
(50.00)
-
50.00
100.00
150.00
200.00
250.00
Net Income

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Recommendation: Considering the growth capability of the company and its ever improving
financial performance it is recommended to buy additional shares in the company to improve
overall return from the portfolio (Hua et. al. 2015).
Bellamy’s Australia Limited:
A major food and beverage company in Australia, Bellamy’s Australia has a huge potential to
grow in the market as within a period of 5 years since its inception in 2014 the company has
made significant mark in the food and beverage industry in the country. Following table contains
financial information about the company’s performance since its inception in 2014 (Kindig, and
Milstein, 2018).
Bellamy's Australia Ltd
All amounts are in $' millions except per share data
2014-
06
2015-
06
2016-
06
2017-
06
2018-
06
Gross revenue 5
1.00
125
.00
245.
00
240.
00
329.
00
Gross profit margin % 3
6.20
3
2.90
45
.70
38
.10
37
.40
Operating profit
2.00
2
7.00
82
.00
57
.00
75
.00
Operating Margin % 2 33 23 22

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3.60 1.40 .40 .80 .80
Net Income AUD Mil
1.00 9.00
38
.00
(1.
00)
43
.00
Earnings Per Share AUD
0.02 0.09
0
.38
(0.
01)
0
.37
Dividends AUD 0
.07
0
.08
Constant growth in revenue of the company is an indication that the company has been very
successful in achieving sustainable growth in revenue since its inception. Since the company is
in its initial stage of operations investing in the company would enable the portfolio to earn
significant return from the market in the future (Arrow, 2017).
2014-06 2015-06 2016-06 2017-06 2018-06
-
50.00
100.00
150.00
200.00
250.00
300.00
350.00
Gross revenue

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INVESTMENT
The above graph depicting the growth in gross revenue of the company is a major indicator of
company’s sustained growth since its inception (Hoesli and MacGregor, 2014).
Recommendation: To invest in the shares of the company.
Telstra Corporation:
The largest telecommunication company in Australia, Telstra Corporation has been quite
successful in providing its investors value for their investment in the shares of the company
(Huisman and Kort, 2015). The performance of the company since 2013 is documented in the
table below.
Telstra Corp Ltd
Except per share amount other items are in $' million
2013-06 2014-06 2015-06 2016-06 2017-06 2018-06
Gross revenue 25,502.
00
25,119.
00
25,845.
00
25,834.
00
25,912.
00
25,667.
00
Gross profit % 74.
80
74
.10
73.
40
71.
90
57.
70
52.
00
Operating
profit
7,698.
00
7,789.
00
7,729.
00
7,110.
00
2,067.
00
(685.
00)
Operating
profit %
30.
20
31
.00
29.
90
27.
50
8.
00
(2.
70)

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Net profit 3,813.
00
4,275.
00
4,231.
00
5,780.
00
3,891.
00
3,563.
00
EPS 0.
30
0
.34
0.
34
0.
47
0.
33
0.
30
Dividend per
share
0.
28
0
.28
0.
30
0.
31
0.
31
0.
23
Being the largest telecommunication company in the country, Telstra has been quite successful
in providing telecommunication services to the customers in the country and in other parts of the
globe where it operates. Annual revenue and net profit chart of the company since 2013 shown
below are clear proof of company’s stability in the market (Grant, 2016).
2013-06 2014-06 2015-06 2016-06 2017-06 2018-06
-
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
Revenue and net profit
Gross revenue Net profit
The company has paid dividend regularly without failure. The chart below depicts how the
company has earned income per share and paid dividend per share.

22
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2013-06 2014-06 2015-06 2016-06 2017-06 2018-06
-
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
0.45
0.50
EPS and dividend per share
EPS Dividend per share
Despite fluctuations in earnings per share the company has managed stability in paying dividend.
Considering the position of the company in the market it would significantly improve the profile
of a portfolio containing the shares of Telstra Corporation. Thus, the shares in the company
should be hold on to in the future to improve the stability of the portfolio (Graham, Harvey and
Puri, 2015).
Recommendation: It is recommended to hold on to the shares of the company.
Altium Limited:
An Australian domiciled American Company, Altium Limited provides software design for
engineers for computer and electronic items. The company is medium sized enterprise with its
shares are listed in ASX (DeFusco et. al. 2015).
Altium Ltd
All amounts are in $' millions except per share information

23
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2013-
06
2014-
06
2015-
06
2016-
06
2017-
06
2018-
06
Gross revenue 66
.00
75
.00
104.
00
126.
00
144.
00
188.
00
Gross profit % 97
.50
96
.60
97
.50
100.
00
100.
00
100.
00
Operating
profit
(7
.00)
2
.00
11
.00
20
.00
21
.00
30
.00
Operating
profit %
(11.
00)
3
.30
10
.10
15
.90
14
.40
16
.00
Net profit 1
.00
12
.00
120.
00
31
.00
37
.00
51
.00
EPS 0
.01
0
.11
0
.97
0
.24
0
.28
0
.39
Dividend per
share
0
.08
0
.12
0
.16
0
.18
0
.21
0
.25
Gross revenue of the company has continuously showed an upward trend since 2013. The linear
graph below shows how the company has increased in revenue year after year since 2013.

24
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2013-06 2014-06 2015-06 2016-06 2017-06 2018-06
-
20.00
40.00
60.00
80.00
100.00
120.00
140.00
160.00
180.00
200.00
Gross revnue
Increase in revenue is one of the indicators that indicate the growth potential in a company.
Investing in such company is always an option provided other performance yardsticks of the
company are desirable from the point of view of the investors (Hu et. al. 2015).
Recommendation: It is recommended to buy shares of the company to increase the expected
return from the portfolio (Edwards, Magee and Bassetti, 2018).
Technical analysis:
Figure: Share prices of BHP Billiton

25
INVESTMENT
(Source: Au.finance.yahoo.com 2018)
Figure: Share prices of Telstra Corporation
(Source: Au.finance.yahoo.com 2018)
Figure: Share prices of Wesfarmers Limited
(Source: Au.finance.yahoo.com 2018)

26
INVESTMENT
Figure: Share prices of Woolworths Group Limited
(Source: Au.finance.yahoo.com 2018)
Figure: Share prices of Commonwealth Bank
(Source: Au.finance.yahoo.com 2018)

27
INVESTMENT
Figure: Share prices of Flight Centre Travel Limited
(Source: Au.finance.yahoo.com 2018)
Figure: Share prices of Bellamy’s Australia
(Source: Au.finance.yahoo.com 2018)

28
INVESTMENT
Figure: Share prices of A2 Milk Company Limited
(Source: Au.finance.yahoo.com 2018)
Figure: Share prices of Altium Limited

29
INVESTMENT
(Source: Au.finance.yahoo.com 2018)
In the above figure contains the movement in the stock prices of nine selected companies to
identify the opportunity to invest in these stocks. The detailed analysis` that have been conducted
can be clearly understood from the above images which contains each and every single
movement in stock prices over the last 12 months. In conjunction with the financial
performances of these companies as discussed earlier, the movement in stock prices of these
companies clearly support the technical analysis justifying all the stock mentioned to create the
portfolio (Cervelló-Royo, Guijarro and Michniuk, 2015).
Du Pont Analysis:
BHP Billiton ltd
Year Return
on capital
Net profit ratio Asset turnover ratio Financial leverage
2013-14 0.1959 0.2630 0.3900 1.9100
2014-15 0.0602 0.0980 0.3200 1.9200
2015-16 (0.0055) (0.0110) 0.2300 2.1900
2016-17 0.1170 0.1850 0.3100 2.0400
2017-18 0.1764 0.2310 0.3800 2.0100
Wesfarmers ltd

30
INVESTMENT
Year Return
on
Capital
Net
profit
ratio
Asset
turnover
ratio
Financial
leverage
2013-14 0.055
5
0.025
0
1.4500 1.5300
2014-15 0.099
2
0.039
0
1.5600 1.6300
2015-16 0.017
4
0.006
0
1.6300 1.7800
2016-17 0.115
6
0.043
0
1.6000 1.6800
2017-18 0.109
9
0.039
0
1.7400 1.6200
Woolworths group ltd
Year Return
on
Capital
Net
profit
ratio
Asset
turnover
ratio
Financial
leverage
2013-14 0.221 0.040 2.3600 2.3500

31
INVESTMENT
8 0
2014-15 0.218
1
0.039
0
2.3900 2.3400
2015-16 0.085
3
0.014
0
2.2000 2.7700
2016-17 0.154
2
0.027
0
2.3600 2.4200
2017-18 0.159
2
0.029
0
2.4400 2.2500
Commonwealth Bank
Year Retur
n on
Equity
Net
profit
margi
n
Asset
turnover
ratio
Financia
l
leverage
2013-14 0.184
1
0.377
3
0.0300 16.2100
2014-15 0.179
0
0.380
7
0.0300 16.6500
2015-16 0.163 0.380 0.0300 15.5000

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8 9
2016-17 0.160
9
0.395
7
0.0300 15.4600
2017-18 0.143
0
0.364
0
0.0300 14.4900
Flight Centre Travel
Year Retur
n on
Equity
Net
profit
margi
n
Asset
turnover
ratio
Financia
l
leverage
2013-14 0.187
3
0.093
7
0.9200 2.2000
2014-15 0.208 0.108
6
0.9100 2.1900
2015-16 0.180
9
0.093
2
0.9100 2.2300
2016-17 0.159
6
0.090
7
0.8200 2.2400
2017-18 0.171 0.090 0.8900 2.2000

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4 0
A2 Milk
Year Return on
Shareholders
’ Equity
Net
profit
margin
Asset
turnove
r ratio
Financi
al
leverage
2013-14 0.0002 0.000
1
1.4800 1.3100
2014-15 -0.0357 (0.013
5)
1.8700 1.5200
2015-16 0.3175 0.086
3
2.3600 1.5800
2016-17 0.4840 1.650
0
1.9800 1.4200
2017-18 0.4909 0.212
2
1.7300 1.3000
Bellamy's Australia
Year Return Net Asset Financia

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on
Equity
profit
margin
turnover
ratio
l
leverage
2013-14 0.081
2
0.024
9
2.2300 1.4600
2014-15 0.281
3
0.072
4
2.6300 1.4800
2015-16 0.580
1
0.156
7
2.2700 1.7200
2016-17 (0.0093
)
(0.0034
)
1.6000 1.7200
2017-18 0.289
8
0.131
6
1.5000 1.3500
Altium Limited
Year Retur
n on
Equity
Net
profit
margin
Asset
turnover
ratio
Financia
l
leverage
2013-14 1.75
29
0.158
0
1.4000 7.1100
2014-15 1.44 1.151 0.7400 1.4100

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61 9
2015-16 0.18
54
0.246
3
0.5200 1.5000
2016-17 0.20
39
0.253
4
0.5400 1.5100
2017-18 0.26
03
0.269
9
0.6400 1.5300
The above Du Pont analysis clearly shows that all the nine companies selected for the purpose of
the portfolio has positive return on shareholders’ equity, positive net profit margin, positive asset
turnover ratio and attractive financial leverage for the fiscal year ending in 2018. In fact most of
the nine companies have continuously improved on these yardsticks throughout the last five
years. The above analysis thus, highlights the importance of calculation before taking investment
decisions as investment in the above nine stock would improve the return on the portfolio and the
strengths of the portfolio would also be improved significantly (Rogova, 2014). Shares of A2
Milk, Flight Centres and Altium Limited are expected to provide high percentage of returns as is
suggested from the Du Pont analysis as all these three stocks have continuously improved its
return on equity and net profit margin (Benjamin, Mohamed and Marathamuthu, 2018). In fact
all these three stocks have provided more than 25% returns in the fiscal year ending in 2018.
Thus, the objective of earning higher amount of return will be fulfilled from investing on the
shares of A2 Milk, Flight Centres and Altium Limited. On the other hand returns on Telstra,
BHP, Woolworths and Wesfarmers Limited though are relatively low compared to the return on

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the earlier mentioned three companies however, these shares add stability to the portfolio. It
important to maintain standard balance between higher return and stability in the portfolio since
the amount involved in the portfolio is significantly large. Hence, the following weightage
should be added to the nine stock to complete the portfolio (Dupont and Jeanmart, 2017).
No. Company Weighting
1 BHP Billiton Limited 15%
2 Telstra Corporation 15%
3 Wesfarmers Ltd 7.5%
4 Woolworths Group Ltd 7.5%
5 A2 Milk Company Limited 15%
6
Flight Centre Travel Group Limited (Flight
Centre) 15%
7 Bellamy’s Australia Limited (Bellamy) 5%
8 Commonwealth Bank 10%
9 Altium Limited 10%
Total weight 100%
Conclusion:
The above weights have been decided by taking into consideration the value, growth and
stability aspects of these stocks. The stocks that are expected to provide highest amount of return
have been allocated with a weightage of 15% each. Similarly the stocks that are expected to
render stability to the overall profile such as Telstra and BHP again 15% weightage has been

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allocated to each of these stocks. Others with relatively modest return and stability qualities have
been attached with less weightage. This would help in diversification of the portfolio.

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