Financial Analysis Input (1 Viewer)

[chet]

I don't have any other info about the company. Without any other info, analyze the following financials and speculate what might be happening to this fake company.

	Year 1	Year 2	Year 3	Year 4	Year 5
Revenue	100	120	140	240	260
Op Income	10	13	16	24	25
Tax Rate	25%	25%	25%	25%	25%
EPS	$0.38	$0.49	$0.60	$0.60	$0.64
Fully Diluted Weighted Avg Shares	20	20	20	20	20
Average Invested Capital	50	60	70	200	240

 

[zamboni]

Hard to say in a vacuum but based on the revenue growth, looks like they either made an acquisition in year 4 or had a particular product/business line/segment that really took off that same year.

 

[ChiefD]

Are they selling widgets?

 

[zamboni]

Hard to say in a vacuum but based on the revenue growth, looks like they either made an acquisition in year 4 or had a particular product/business line/segment that really took off that same year.

Just to add - must have been an acquisition as invested capital spiked in the same year as revenues did.

 

[dkp993]

First thing I’d want to know is why is their op income % dropping as revenue rises.

 

[zamboni]

First thing I’d want to know is why is their op income % dropping as revenue rises.

Hasn’t dropped by much as a % of revenues but certainly a valid issue.

 

[belljr]

Are they selling widgets?

First of all you're going to have to grease the local politicians for the sudden zoning problems that always come up. Then there's the kickbacks to the carpenters, and if you plan on using any cement in this building I'm sure the teamsters would like to have a little chat with ya, and that'll cost ya. Oh and don't forget a little something for the building inspectors. Then there's long term costs such as waste disposal. I don't know if you're familiar with who runs that business but I assure you it's not the boyscouts.

 

[chet]

Hard to say in a vacuum but based on the revenue growth, looks like they either made an acquisition in year 4 or had a particular product/business line/segment that really took off that same year.

Just to add - must have been an acquisition as invested capital spiked in the same year as revenues did.

Why are the shares outstanding static when invested capital is going up?

Year 1-5 Op Inc is up 150% but EPS less than doubles with the same # shares outstanding? Increased deprecation or income expense bringing down net income?

 

[zamboni]

Why are the shares outstanding static when invested capital is going up?

Seems like the company acquired another company with cash and without issuing new shares. So the remaining outstanding shares after the acquisition is the same as the company had before the acquisition.

Year 1-5 Op Inc is up 150% but EPS less than doubles with the same # shares outstanding? Increased deprecation or income expense bringing down net income?

Operating income is defined differently, but it is usually before depreciation, interest and taxes - and from there you derive EPS. The tax rate stayed the same so the widening difference between op income and EPS likely was due to interest and/or depreciation/amortization.

 

[dkp993]

First thing I’d want to know is why is their op income % dropping as revenue rises.

Hasn’t dropped by much as a % of revenues but certainly a valid issue.

Obviously it’s business (the type of) dependent but you’d like to see some economy of scale or efficiency gains as rev grows. The trend the other way certainly begs some questions and research.

 

[Zow]

Hard to say in a vacuum but based on the revenue growth, looks like they either made an acquisition in year 4 or had a particular product/business line/segment that really took off that same year.

Just to add - must have been an acquisition as invested capital spiked in the same year as revenues did.

Why are the shares outstanding static when invested capital is going up?

Year 1-5 Op Inc is up 150% but EPS less than doubles with the same # shares outstanding? Increased deprecation or income expense bringing down net income?

Yeah I don't at all pretend to be some expert on this stuff, but the bold is what confused the heck out of me when looking at this.

 

[zamboni]

Hard to say in a vacuum but based on the revenue growth, looks like they either made an acquisition in year 4 or had a particular product/business line/segment that really took off that same year.

Just to add - must have been an acquisition as invested capital spiked in the same year as revenues did.

Why are the shares outstanding static when invested capital is going up?

Year 1-5 Op Inc is up 150% but EPS less than doubles with the same # shares outstanding? Increased deprecation or income expense bringing down net income?

Yeah I don't at all pretend to be some expert on this stuff, but the bold is what confused the heck out of me when looking at this.

It’s funky accounting stuff, for sure. Basically boils down to the same number of shares outstanding before and after the acquisition.

 

[Zow]

Hard to say in a vacuum but based on the revenue growth, looks like they either made an acquisition in year 4 or had a particular product/business line/segment that really took off that same year.

Just to add - must have been an acquisition as invested capital spiked in the same year as revenues did.

Why are the shares outstanding static when invested capital is going up?

Year 1-5 Op Inc is up 150% but EPS less than doubles with the same # shares outstanding? Increased deprecation or income expense bringing down net income?

Yeah I don't at all pretend to be some expert on this stuff, but the bold is what confused the heck out of me when looking at this.

It’s funky accounting stuff, for sure. Basically boils down to the same number of shares outstanding before and after the acquisition.

Thanks. I responded to Chet before reading your response to his post above. Seems odd, but your explanation (given the little facts we know) makes sense.

 

[zamboni]

Are they selling widgets?

First of all you're going to have to grease the local politicians for the sudden zoning problems that always come up. Then there's the kickbacks to the carpenters, and if you plan on using any cement in this building I'm sure the teamsters would like to have a little chat with ya, and that'll cost ya. Oh and don't forget a little something for the building inspectors. Then there's long term costs such as waste disposal. I don't know if you're familiar with who runs that business but I assure you it's not the boyscouts.

FOUR?!

 

[ConstruxBoy]

CYDY?

 

[chet]

CYDY?

No