Dupont Analysis on Jc Penney and Nordstrom

The ROE that Komatsu indicates in its five-year consolidated financial performance section of the 2015 Annual Report is 9% in 2015 and a solid number of 10.6% in 2014 (I say “solid” because the 2015 percentage is variable still according to Komatsu) (31). In contrast, Caterpillar and John Deere delineate ROE’s of 19.6% and 30.8%. Given the statistics recorded by Caterpillar, John Deere, and Komatsu, it would be logical to see that Komatsu is the least attractive group. However, Komatsu’s ROE has traveled over five years

1. Decompose IBM’s ROE (by quarter) and discuss the factors (and trends) that contribute to

b) (2 pts.) Does either firm have a dominant strategy? If yes, which firm and what strategy?

1. Decompose IBM’s ROE (by quarter) and discuss the factors (and trends) that contribute to

Even though RNOA for 2009 is greater than 2008 i.e. the operating income is greater for 2009 than for 2008, the ROE for 2008 is greater than ROE for 2009 because of non-operating income.

2． Wal-Mart’s average ROE for the 1997 fiscal year was 19.7% [$3,525/($18,503+$17,143)/2] while Sears’ average ROE over roughly the same period was 22.0% [$1,188/($5,862+$4,945)/2]. Don Edwards was puzzled by these numbers because of Wal-Mart’s reputation as a premier retailer and Sears’ financial difficulties not long ago. Use the 3-step DuPont method to break down the ROE calculation and determine what is driving the individual performance of each of these two companies during

When combining the figures for ROE, ROA and the DuPont analysis it appears that the company is using leverage favourably. ROE is greater than ROA and assets are greater than equity. This is a positive sign for shareholders as it suggests a good investment return in a company that is managing its shareholder equity well (Evans & McDowell, 2009).

The industry backdrop remains very challenging but with extremely weak investor sentiment and several drivers for improved earnings/FCF, we see value in shares for contrarian investors…We’re encouraged by the turnaround story unfolding at JC Penney and see a path to over $1 billion of EBITDA in F2017. Given cyclical headwinds facing apparel retailers (late cycle environment = apparel losing share-of-wallet) and secular pressures facing traditional, mature, brick & mortar department stores (i.e., Amazon.com (AMZN)), we expect valuation multiples to remain low; however, we see favorable risk/reward at current levels. Our $9 price target is based on ~5.9x our NTM +1 EBITDA, between current levels (~5.2x) and the one-year historical average

Macy is one of the nation’s largest Omni channel retailers that just started off as a fancy dry goods store at the corner of 14th street and 6th Avenue in New York City in 1858. First-day sales totaled $11.06 but by the end of the first full year, sales grossed approximately $85,000. By 1918, R.H. Macy & Co. was generating $36 million in annual sales. In 1922 it began to open regional stores and take over competing retailers. On December 19, 1994 Federated Department Stores, Inc, which is now known as Macy’s Inc. acquired R.H. Macy & Co. Shortly after in 2000 Macy’s opened its first store outside of the continental United States in Puerto Rico. In June 2001, Federated purchased the Liberty House operations in Hawaii and Guam, bringing the proud Macy’s tradition and heritage to the Pacific. On February 28, 2005, Federated agreed to terms of a deal to acquire The May Department Store for $11 billion in stock, creating the nation 's second largest department store chain with $30 in annual sales and more than 1,000 stores. On July 28, 2005, Federated announced, based on the success of converting its own regional brands to the Macy 's name, its plans to similarly convert 330 regional department stores owned by the May Company. This is how Macy’s received its name which is recognized all over the U.S. Macy’s now serves customers through approximately 775 stores in virtually every major geographic market in the United States, as well as the macys.com

In the chart below, you will see the amount of total asset value that has been depreciated as of 1993. This value is similar for both companies. However, this result is deceiving because it only

As depicted in the above table, the initial return on equity (ROE) ratio indicates both Caterpillar’s and CNH Global’s profitability in terms of the stocker’s return as it relates to company profits and total equity (Smart, Gitman, & Joehnk, 2014). While it is an important tool for investors when comparing multiple historical values for a company, one cannot determine the reasoning’s behind its increase or decrease when solely examining its value alone. Therefore, the utilization of the expanded ROE equation known as the DuPont formula (located at the bottom of the table) provides an explanation by including each companies’ profit margin (PM), total asset turnover (AT), and equity multiplier (EM). Consequently, each component plays a significant

These are strike years so we will ignore them. In 1994, ROE is less than that of last three years. Overall its not good sign, but its explanation will be given in upcoming ratios.

For Apple, net profit and total assets turnover ratio were the key factors in pulling down the ROE. According to figure 4.1, in FY 2012, net profit and total assets turnover ratio of Apple were 26.67% and .89 respectively and it fell down to 21.60% and .83 in FY 2013 and its equity multiplier also increased which shows that assets were purchased through more debt. Hence, it becomes risky for a company if its equity multiplier increases at much faster pace than net profit and total assets turnover ratio. At the same time, ROE of its competitor was just affected by equity

In 1907 both companies agreed to combine interests while remaining separate entities, and as a result they share both profits and dividends. However, the divergence between the two companies suggests that there is semi strong market efficiency because there are arbitrage opportunities, most likely due to insider information.

ROE and ROA are measures of profitability that are popularized the most among others due