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La Farge as an Investment Decision - Assignment Example

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In the paper “La Farge as an Investment Decision,” the author submits a report of his analysis for La Farge. He has used the financial data from its published statements for a 5 year period from 2004 to 2008. La Farge’s financial performance has been compared to the industry and sector it belongs to…
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La Farge as an Investment Decision
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Download file to see previous pages The company has been aggressive in financing its growth through debts. Investors may be happy at this ratio because the benefits of earnings are spread to the same number of stockholders and there is no need to add in new investors. However, analysts feel that a high debt financing may result to unstable earnings because of high interest that can be too much for the company to handle (Investopedia) The total debt to equity ratio of 115% shown in Table 1 is an analysis done by stockbrokers that is higher than the sector average (Table 1 attached) A high ratio is generally accepted to capital intensive industry that tends to have a higher ratio, according to Investopedia
2. Financial analysis of the company’s published accounts over a five (5) year period (most recent) including profitability and liquidity ratios and analyzed with the graph for each ratio are presented in annexed tables and charts.
Gross Profit Ratio. As of 2008, La Farge has a gross profit ratio of 27.86% which is slightly lower than 27.89% of 2007. Its gross profit ratio does not differ much in previous years’ performances as shown in Table 1 and Chart 1. (Reuters Financial Statement)
Net profit ratio. The sales turnover of 2008 provided an 8.40% net profit ratio for the company which is lower than its net profit ratio of 2007 that is 10.8% Table 2 and Chart 2 shows the Net Profit Ratio of the company for five years.
Return on Shareholders. In 2008, La Farge gave the shareholders a return on their investment of 18%. This figure is very much lower than the 25.39% ROS in 2007. Table 3 and Chart 3 show fluctuating ROS, with 2007 as having the highest, followed by 2004.
The share price of La Farge as of November 20, 2009, is €56.83. From the chart, it showed a significant upward movement from July to October. The share price movement is an indication of investors’ confidence in the company’s performance or a response to economic problems.  ...Download file to see next pages Read More
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At first, I thought 4 of pages is too much for such a subject. But now I see it could not be done smarter. As the author starts you see the depth of the question. I’ve read all at once. Great example

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