Financial technical analysis help is a difficult analysis to understand. It is therefore we comes out with a blog to explain the same using Ted baker from our corporate finance assignment help experts and service providers.
Technical Analysis (Stock Performance) –
Valuation ratios like Price/Sales, Price/Earnings and Earnings/EBITDA have been quite low because of two main reasons. First, founder and CEO of Ted Baker Mr. Ray Kelvin had been alleged of “forced hug” and “culture of unchallenged harassment” through a campaign has been surfaced (Kollewe 2019). Mr. Ray Kelvin has been forced to leave his business position which has resulted in the negative light of Ted Baker. Second, lower than expected profit estimates has led to caution among shareholders.
Analyzing the stock performance in last few years we see,
- P/E ratio for the company has been continuously decreasing due to volatility in the stock price. Revenue growth has been above 11% in last 5 year on YoY basis and the stock price of Ted Baker has almost halved from a peak in 2016.EPS growth of the company has been declined from the past (Sharecast n.d.).
Looking at the 5 year performance chart of stock of Ted Baker PLC we can see that stock has almost lost 30 percent of its value after 2014. The major reason attributed to this stock fall is the low level of sales in UK and other regions which has prompted the company to look for growth in newer markets and across different channels (Tougher market for Ted Baker 2018).
(Financial times n.d)
The P/E ratio for company has been down 13.11x times in 2018 as compared to 24.84x times in 2017 which was around the market average of 15.8. The reason for continuous decline in P/E is also because P/E doesn’t consider the enterprise value, it only takes in account of the market capitalization. A company to alter its P/E by taking in debt or spending its cash to achieve lower ratio and Ted Baker has done it in a similar fashion. The company a debt of £47m outstanding in 2018 and cash and short-term investment has been on a continuous decline.
From the graph we can see the ability of Ted Baker to generate free cash flow has continuously declined. Free Cash-flow generating ability of the company has been down to heavy expenses in marketing and discounts. This means it has to borrow additional capital in the form of short-term loans for its operations.
- Enterprise value/EBITDA – It is the ratio used by an investor to look at the value of the company as an acquirer considering the existing level of company’ debt. The enterprise value takes into account of the company’s cash and debt level considering the stock price and relates this value to company’s profitability (Maverick 2019).
Enterprise value is calculated by adding values of market capitalization, debt, preferred share, minority interest and subtracting cash and cash equivalent. A lower value indicates that the company is undervalued and the higher value indicates that the company is overvalued as per pay someone to do my finance assignment team. The value for S&P 500 companies ranges from 11 to 14 and 12.98 in June 2018 for S&P.
From the ratio analysis, we can clearly see that the firm is undervalued and from the stock price history we can also note that company has lost about 30 % from last year.
- Price/Sales ratio is another key ratio that determines how much investors are willing to pay for each dollar of sales. The Price/Sales ratio has almost halved from 2.17 in 2017 to 1.14 in 2018. This reflects the unwillingness of investors to pay for the Ted Baker’s stock even the sales has been continuously increasing around 11% in 2018.