DP World Company Analysis - Essay Example

DP World operates in Europe, Middle East, Africa, Asia Pacific, the Indian sub-continent, Australia, and America. The company has taken initiative in the process of reducing the frequency of lost time injuries and has been successful in bringing down the value of the same to 7.6 in 2011 from 10.1 in 2009. The company also focuses on the internal control of the company related to the organizational structure of the company, code of conduct, whistle-blowing policy, risk management, and performance, etc. Pensions and post-retirement benefits are provided to the employees of the company, which shows that the company takes enough care of its employees even after the termination of employment (“DP World 2011 Annual Report”, 1-10).
The stock of a company is said to be overvalued if the current price of the stocks of the company is greater than the stock’s intrinsic value. Here the price-earnings of the stock are primarily being considered to explain the reasons behind the overvaluation of the stocks of DP World. The price-earnings ratio of the company has been relatively high in comparison to the historical price-earnings ratio of the company, which is why the stock of DP World is considered to be overvalued. The growth in the global container traffic has risen by three times the rate at which the world used to trade in the past decade. This has also benefited the investors of the DP World due to the emerging trend of the global economy. DP World has escaped the Wall Street crunch and the consecutive downturn of the global economy as witnessed in 2008 and has successfully returned to the range of 40% with $2.7 billion of cash along with the long-term debt of the company. Thus, the rise of DP World has been a consistent one. But the company has clearly shown signs of overvaluation with its IPO price which has turned out to be 22times the value of the shares of the company. The main reason behind this is the fall in the share price of the company from $1.20 to $ 0.70 at the time of the global financial meltdown in 2008-09.