Security Analysis Valuation and Investment

Security Analysis Valuation and
Investment

TABLE OF CONTENTS
PART A......................................................................................................................................3
2. DuPont Analysis.................................................................................................................3
PART B......................................................................................................................................5
4 MACRO ECONOMICS AND COVID 19.........................................................................5
7. Bond...................................................................................................................................7
REFERENCES.........................................................................................................................10
Appendix..................................................................................................................................11

PART A
2. DuPont Analysis
A.
Attached in appendix.
B.
Five step du Pont analysis 2016 2017 2018 2019 2020
Tax Burden = Net Income/EBT 0.63 0.65 0.86 0.75 1.63
Interest Burden = EBT/EBIT 1.07 1.02 0.99 4.52 1.41
Operating Income Margin = EBIT/Sales 0.25 0.25 0.25 0.04 0.02
Asset Turnover = Sales/Total Assets 0.60 0.57 0.60 0.36 0.32
Equity Multiplier = Total Assets/Shareholders Equity 2.13 2.32 2.02 2.18 2.41
Return on equity 21.7% 21.7% 25.8% 11.7% 3.4%
C.
The DuPont analysis refers to the expansion of return on equity. It is a useful tool
which is being utilized to decompose the various drivers of ROE. This allows the investors in
specifically focusing on the key metrics of the financial performance which helps in
determining the key strengths and weaknesses of the company (Saus–Sala, Farreras–Noguer,
Arimany–Serrat and Coenders, 2021). It assists the investor in knowing the key components
which has contributed in the major changes in ROE. Based on strengths and weaknesses
identified, corrective actions are undertaken to further improvise the situation along with
taking the advantage of the strengths identified.
By looking at the five-step model of DuPont, it can be seen that there has been an
increase in the interest burden over the given time period but the main reason behind the
decline in the return on equity is the operating income margin which can be seen decreasing
in the 4 years which indicates a real business-related issue. In addition to this, it can be seen
that there is an increase in the tax burden on the company over the years which has resulted
into affecting the net income of the company (Daryanto and Arrifa'i, 2019). Based upon this,
it can be stated that the weaker area for the kept strengthening areas of the company is its
asset turnover which can be seen to be increasing over the years which indicates that the
company trying to optimum utilize its assets in terms of generating revenue. On the other
hand, in regard to the weakness, the increasing tax and the interest burden along with the
operating profit margin is a point of concern where further improvements are necessary in
order to increase the return on equity.

There are number of drivers which drives the profit of the company which can be
bifurcated into financial and non-financial profit drivers, in terms of financial drivers, it
involves the price, fixed and the variable costs, sales volume, cost of debt and the stock.
These drivers can be seen in the financial statements of the company. While on the other
hand, in regard to the non-financial profit drivers it might not be able to expressed in terms of
amount. It incorporates, the overall productivity of the company, level and the quality of the
customer satisfaction, business culture and value, market share, customer satisfaction level
and morale, employee safety etc.
The company has implemented certain strategies which has resulted into
contributing towards the success of the organization. The company followed and
implemented three strategies which are in regard to creating high quality content for the
families, making that content more engaging and the last one is to making the content more
accessible by the way of innovative use of technology. In the present times, the company
have got the licensed shops and the products across the globe they are making use of the
foreign outsourcing strategy which will help the organization in effectively meeting up with
the growing demand of its products along with keeping its cost lower (Dowdell, Klamm and
Andersen, 2020). This strategy might result into assisting the company in adapting too well in
the other nation as they will adopt the various of the local customs while maintaining the
American taste. The company is regularly working on taking and developing competitive
advantage over others through the way of innovation in its product development. Also, the
company has also announced a strategic reorganization of its media and entertainment
business and in this new structure, the Disney’s world class engines will be more
concentrating on the developing and generating the original content in regard to the
organization’s streaming content services along with its legacy platforms. In addition to this,
the distribution and commercialization of the activities would be centralized into one and will
also be responsible for the monetization of the content and will also oversee the operations of
the organization’s streaming services as well.
These strategies will have a huge impact over the profitability of the company as it
has the ability to increase the customer base of the company which will result into increasing
the revenue of the company leading to enhancement in the profits. In addition to this, the cost
level of the company will decline which will result into affecting the enhancing the profits.
The increase in profitability would result into decreasing the requirement of the company in
taking additional debt. All these factors are having the ability to affect the profits of the