Course: CORPORATE FINANCE
"MIRACLE LIFE, Inc"
Miracle Life Inc., founded in 1980 by Angela Simpson, is one of the companies possessed the largest global marketing network in the world which sells products to control overweight, nutritional supplement products and personal health care products with the goal: "to improve health and happiness of people around the world. " From the early years since its establishment, the company has gained strong growth. If in 1982, the turnover of Miracle Life reached 2 million, by 1992, sales reached $ 200 million and concurrently, the enterprise has expanded the worldwide scope of business activities. Until 2007, revenue of the company gained $ 2.1 billion Along with the sustainable growth, the reputation of MLI is rapidly growing. In 1986, the company began trading on the NASDAQ market and until February 2007, Miracle Life became a second public company which is listed at the New York Stock Exchange under the symbol MLI. At the end of that year, the stock of MLI has appreciated 47% and latched at 58.91 USD/ share. MLI has become famous on Wall Street. Those who desire to be richer have been attracted by the profit growth achievements in a long time of this company, and they believe that the company will also be able to maintain a high growth of revenue in the next time. However, some analysts still wonder about the sustainability of the business model of this enterprise. This essay will analyze the financial of MLI in the previous years in order to have a clear view about this company. Question 1: Estimate Beta coefficient (β) of the companies: RELV, USANA, NUS, SMG, MLI Beta coefficient (β) is a measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. Beta as the tendency of a security's returns to respond to swings in the market. A beta of 1 indicates that the security's price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security's price will be more volatile than the market Based on the figures from 2004 to 2007 (Appendix 1), using Slope (X, Y) with: X: rate of return for the security
Y: rate of return for S&P 500 index
Beta coefficient (β) of RELV, USANA, NUS, SMG, and MLI is calculated as below: |Beta coefficient (β) of RELV = 0.054 | |Beta coefficient (β) of USANA = 0.457 | |Beta coefficient (β) of NUS = 1.156 | |Beta coefficient (β) of SMG = 1.511 | |Beta coefficient (β) of MLI = 0.664 |
Question 2: Analyze revenue, cost and profit of MLI This part will take the business performance of MLI from 2004 to 2007 into consideration Table 1: Income Statement of Miracle Life Inc. (MLI), (unit: million dollars)
|Indicators |2004 |2005 |2006 |2007 |Average growth in 4 years | | | |Amount |Compare with |Amount | | | | |2004 | | |ASSETS | | | | | |Cash |202 |88 |154 |187 | |Account Receivables |97 |102 |155 |171 | |Inventories...