In Wesfarmers, the forecasting next five year chart shows that sales revenue in 2011 will be 8% and it will keep the growth rate at 4% from 2013 to 2015. Because the assets turnover is rarely changed, the report estimate the rate as 1.69, which is the same record as the Wesfarmers 2010 annual report. The profit margin is change largely these years. So the report takes 7.5%, which is the average rate of five year accounting numbers. This report will use the forecasting numbers above, so it can analysis the future performance of Wesfarmers and estimate value per share of common stock for shareholders by following four valuation methods.
1. Discount dividend model 2. Discounted abnormal earnings model 3.…show more content…
In the early of May, the spread of Wesfarmers between bids and asks range between $0.01 and $0.06. The share market of Wesfarmers tends to be stable and investors are more rational to make fairly reliable forecasts of Wesfarmers’ share price. According to the ASX announcement of Wesfarmers, the company got strong investors’ support in bond and may acquisition the interests in Burrup Holdings Ltd and/or Burrup Fertilisers Pty Ltd. It shows that the business of Wesfarmers is doing well and the company structures will growth largely. In the short-term, the share price would not rise very largely and it may drop down a little bit if the Wesfarmers actually get the interests in Burrup. However, if people treat Wesfarmers as a long-term investment, the share price will rise eventually because the market value is currently lower than evaluation value of discounted abnormal operating earnings model. Wesfarmers is suitable for the investors who willing to wait for a little longer investment return.
From the recommendation above, the common shareholders of Wesfarmers should be treated as a suggestion and think about it carefully. The share price may change any time when the managers of Wesfarmers change their business strategy or contribute different growth rates in the future. This report will find out that the key factors will largely influence the forecasting recommendation. The reason of sensitivity analysis is that managers can choose