The shares of german car manufacturer droped in the last couple of months.As probably some of you know on september 2015 The Environmental Protection Agency issued o notice of violation of the clean air act by Volkswagen Group.
Despite the dramatic fall,I consider Wolkswagen Group is still a good business which deserve to invest now.
BALANCE SHEET
2014 2013 2012 2011
CURRENT ASSETS : 131,102 122,192 113,061 105,640
Inventory : 31,466 28,653 28,674 27,551
Receivables : 21,096 19,621 18,460 17,630
TOTAL ASSETS : 351,209 324,333 309,518 253,769
LIABILITIES AND EQUITY
Accounts payables : 17 838 16,583 15,662 15,244
TOTAL CURRENT LIABILITIES : 130,706 118,625 105,526 101,237
Long term debt : 10,643 15,913 15,096 7,661
TOTAL LIABILITIES : 261,020 234,296 227,523 190,415
TOTAL EQUITY : 90,189 90,037 81,995 63,354
INCOME STATEMENT
2014 2013 2012 2011
TOTAL REVENUE : 202,458 197,007 192,676 159,337
Less: COST OF GOODS SOLD:(145,934) (144,135) (141,949) (117,117)
GROSS PROFIT : 34,394 33,690 33,379 27,106
OPERATING PROFIT : 11,921 11,187 11,824 11,1000
Less: Finance Cost : (1870) (1614) (1,786) (1,325)
NET INCOME : 10,985 9,093 21 ,712 15,409
PERFORMANCE MEASURES
1 PROFITABILITY
2014 2013 2012
ROCE :5,40% 5,43% 5,79%
GROSS PROFIT MARGIN :16,98% 17,1% 17,32%
PROFIT FOR THE PERIOD MARGIN:5,88% 5,67% 6,13%
ASSET TURNOVER :0,9 0,95 1,04
Despite an increase in revenue of 24,6% in 2014, the gross profit margin has fallen over 0,7% to 16,98%.Although revenue has shown an increase the falling gross profit margin may indicate that the company is unable to achieva the same level of sales price that it was in 2013,or is not efficient at controling all its costs.
The ROCE has actually fallen slightly from 5,43 in 2013 to 5,40 in 2014,this mean that the company is not good at generating profit from its capital employed.The decrease in the ROCE is due to the fall in the profit margin.
2 LIQUIDITY
2014 2013 2012 2011
CURRENT RATIO : 1 1,03 1,07 1,04
INVENTORY HOLDING PERIOD: 78,7 days 72,5 days 73,7 days 85,8 days
RECEIVABLES PERIOD : 38 days 36,3 days 35 days 40,3 days
PAYABLES PERIOD : 45 days 42 days 40 days 48 days
A slightly decrease in the current ratio in 2014 with 0,29% and 0,65% comparative with 2013 and 2012 that could indicate that the company has some liquidity problems,that its happen because the company is strungled to pay is debt.Payable period was 45 days in 2014 comparative with with 42 days in 2013.
Company inventory increased with 8,5% in 2014 comparative with 2013 could indicate that the company is having problems selling its products..The company should take steps to increase inventory turnover by removing unpopular items of inventory.
3 MEASURING RISK
2014 2013 2012 2011
GEARING : 10,55% 15,01% 15,52% 10,78%
INTEREST COVER : 6,37 6,93 6,62 8,37
The company present a low level of debt more than that the level of gearing decreased in 2014 at 10,55% comparative with 2013.
BASIC VALUATION OF BUSINES
NET INCOME :10 985
MARKET PRICE :34,953,410
(Outstanding shares*share/price)
EQUITY : 90 189
SHARE/PRICE : 118,45EURO/SHARE
P/E RATIO : 9,44
EPS : 12,35
DIVIDEND :4,80
PRICE BOOK RATIO : 0,6
EXPECTED RETURN AFTER 1 YEAR : 10%
The actual value of P/E Ratio and Book Value I could say that the company value is undervalued and is a good opportunity to invest.
ROCE(Return on capital employed) Profit from operation/Capital employed*100
CAPITAL EMPLOYED=TOTAL ASSETS-CURRENT LIABILITIES
GROSS PROFIT MARGIN=GROSS PROFIT/REVENUE*100
PROFIT FOR THE PERIOD MARGIN=PROFIT FROM OPERATIONS/REVENUE*100
ASSET TURNOVER =REVENUE/CAPITAL EMPLOYED
CURRENT RATIO=CURRENT ASSETS/CURRENT LIABILITIES
INVENTORY HOLDING PERIOD=INVENTORY/COST OF SALES*365
RECEIVABLES=RECEIVABLES/REVENUE*365
PAYABLES PERIOD=PAYABLES/PURCHASES*365
GEARING=DEBT/DEBT+EQUITY*100
INTEREST COVER=PROFIT BEFORE FINANCE CHARGE AND TAX/FINANCE COST
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