Finance analysis Essay Example

Introduction

Myer is the largest full-line department store group in Australia. It has been in operations for over 100 years. It has over 60 stores distributed across various prime locations in Australia. On average its stores are visited by more 150 million times by the customers each year and its loyalty program has over six million members. It is focused on providing satisfactory services to all its stakeholders which include; its customers, its 12500 members of staff, the 50000 shareholders and the 12000 global suppliers. The company offers mainly eleven different core products; electrical goods; footwear; children wear; beauty, fragrance , and cosmetics; women wear; hand bag and accessories; toys; men wear; intimate apparel and the general merchandise ( Myer company, 2017)

Analysis of the company

The investors of a company are the people who put their money in the company with the expectation of good returns. They risk their money in for the exchange of the future income. Both present and potential investors are interested in the performance of the company before reaching a conclusion on whether to invest in the company or not. Therefore, for them, they are interested in the profitability of the company, the dividend payment policy, the movement of the price of the stock.

Performance of Myer Company

From the company’s financial reports has been going down over the last five. Its profitability has been decreasing constantly from 2012 to 2016. In 2012, the company made a profit attributable to the shareholders of $ 139,365, and it has decreased over time to $ 60,543 in 2016 indicating a 56% decrease.

The returns on equity (ROE) measures the returns which the shareholders earned based on their invested capital. The return on equity has been consistently decreasing over the last five years. It recorded highest in 2011 with 15.87% and lowest in 2015 with 3.45%. This is attributed to the reduction in the total revenue which leads to a decrease in the profit attributable to the ordinary shareholders. The profit has decreased from $139,365 in 2012 to $60,543 in 2015. The decrease in sales revenue and hence profit is attributed to the intense competition in the industry. These have been increasing in the new competitors which has diluted the market share of the company. Moreover, the company’s total equity has also been increasing over the years from $877,680 in 2012 to$ 1,107,765 hence the decrease in profits is shared by an increase in the shareholders’ funds, which leads to decrease in ROE. The potential investors should, therefore, avoid investing in this company, since its returns are not promising at all. From the trend, it is clear that the performance of the company is expected to deteriorate further.

Dividend payment

The dividend payment to the shareholders has been decreasing over the time from $ 0.21 per share in 2012 to $ -0.02 in 2016. The dividend payment is decreasing over the years with varying rate, as it can be seen from the table that it decrease by 11% in 2013, 10% in 2014, 173% in 2015 and 83% in 2016. Therefore there is no consistent rate which can be accurately be used to measure the expected future dividend payments. Based on this information the potential investor are discouraged from investing in this company since it does not promise any future dividend payments to the investors. Hence they should avoid it.

Reference

The Myer Company, 2017. — The Myer Company Incorporation Profile, [accessed online] https://www.myer.com.au/c/about-myer/the-company/about-us/content-1878-1899.html <accessed on 25 May 2017>

The Myer Company, The financial reports, [accessed online] http://investor.myer.com.au/FormBuilder/_Resource/_module/dGngnzELxUikQxL5gb1cgA/file/Myer_Annual_Report_2016.pdf <accessed on 25 May 2017>