In this phase,I would like you to investigate at least 3 other companies in your firm’s industry so that you can make comparisons of your company with industry competition.
Some industries may have many participants. I suggest you pick 3 or 4 key industry participants in addition to your firm. You may wish to pick based on Revenue size, profit margin, and return on equity for the most recent calendar/fiscal year. Suggestion: Go to www.zacks.com. Click on screen, then company descriptors, then industry.
There is a drop-down box with 264 industry codes. Try to find your firm’s industry. You may wish to screen by revenues, ROE, profit margins based on your firm’s ROE and margins.
Compare your company to the 3 or 4 other industry participants based on the Financial Statement Analysis you developed in the first phase of this exercise.
For each statistic using the most recent full year data, compare your firm’s ratio to the average of the industry’s ratio: add your firm’s ratio to the 3 – 4 company’s ratios and divide that sum by the sum of your company plus the other companies’ latest full year data.
Once you have completed that part of exercise, determine your firm’s position in its industry based on each of the statistics: below average, average, above average. Develop an opinion of your firm’s status within its industry based on financial ratios.
Compute the DuPont ROE analysis for the most recent calendar/fiscal year for your company and the 3-4 comparable companies in the industry.
Determine positives/negatives of your firm relative to the 3 or 4 other firms and the industry average financial information or on more subjective factors.
More subjective factors could include brand image, popularity of product (anecdotal), market share, etc. You may wish to research industry reports about the industry in which your firm operates. Morningstar and Standard &Poors publish industry reports for many industries. You work product should be:
1. Comparison of financial ratios of your company with its industry. This may be done easiest on excel spreadsheet.
2. Summary conclusion of your firm’s financial status relative to the industry.
3. Short section (1 page?) of your firm’s Strengths and weaknesses.