United Kingdoms Biggest Player in the Food Industry - Essay Example

On April 16, 2010, the company released a news story that showcase one of its new innovative products called milk bags. The news release may have influenced the price of the common stock.

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J Sainsbury plc is the United Kingdom’s biggest player in the food industry with a market share of 16%. In 2009 the company achieved total revenues of 18,911 million pounds. The revenue total was 6% higher than in 2008. Normally greater revenues lead to better bottom-line results. In the case of Sainsbury, the greater revenues did not help the company improve its performance since its net profits decreased between 2009 and 2008. In 2009 the firm had a net income of 289 million pounds, a figure that is 40 million pounds lower than the previous year. The net margin of the company was 1.53%, while the industry norm is 1.4% (Dun & Bradstreet, 2010). The return on equity and return on assets of the company were 6.88% and 2.88%. Both figures were lower than the industry average of 11.9% and 5.5% (Dun & Bradstreet, 2010). The current ratio of the company which shows the ability of the firm to pay its short-term debt was 0.55. The current ratio industry norm is 1.9 (Dun & Bradstreet, 2010). The results mean the firm is underperforming in comparison with the industry and that the firm is at risk of having cash flow problems. The stock price of the company during April faced upwards tendencies. These types of movement are short-term fluctuations. Based on the fact that the company is facing liquidity problems and the bad profitability results in terms in relation to its assets and equity I would not invest in the common stock of Sainsbury’s. Read More