Satisfactory Essays
Likewise, Lexmark’s decline in inkjet exit revenues contributed to the so not-encouraging financial results. Exiting the inkjet printer industry and switching the business focus left Lexmark with a high amount of inventory in its deposits. Such an inventory added to the company’s losses that overcame its actual costs, and additional fees necessary to maintain the non-commercial inventory. A high drop in Lexmark’s stock intrinsic value could also be explained by the company’s desperate acquisitions and goodwill investments. The drastic and serious campaign that Lexmark launched into, when buying new companies meant to enhance shareholder value, can be seen as a very urgent strategic alternative that increases the company’s risk level and lowers its profitability rank. The idea of high risk tends to scare investors away and decrease the actual firm value, which in Lexmark’s case definitely ends up being negative.…show more content…
The restructuring process seems to portray a promise that the company is planning a major come back, powerful enough to justify the adequate expected rate of return of 11.15% and the company’s projected future growth of 10%. If the company decided to implement projects and strategies that are worth decreasing the company’s profits in the short run, but promises extravagant payback in the long run, then they should most likely have reasonable calculations behind their scenarios which would boost the stock price up. Investors could actually approve Lexmark’s efforts and evaluate it as a procedure meant to serve their best
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