Country Road Limited

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| 2010|
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Country Road Limited|
Business analysis and valuation|

* Table of Contents
Executive summary3
1.The Retail Industry & its Prospects4
1.1Current & Future Overview4
2Corporate strategy4
3Earnings Manipulation Assessment & Findings5
4The Facts: Financial Ratio Analysis6
5Profitability and Operating management of CR6
5.1Dupont System Analysis6
5.2CR’s operating management8
6Investment management8
6.1Working capital management8
6.2Long-term assets9
7Financial management10
7.1Short-term liquidity10
7.2Financial structure and long-term solvency11
8Dividend payout ratio and Sustainable growth rate12
9Cash flow12
10Forecasting13
10.1Sales Growth13
10.2Cash flow forecast14
10.3Net Operating Profits after Tax (NOPAT) margins16
10.4Working capital to Sales16
10.5Long-term assets to Sales17
10.6Capital structure17
11Company valuation18
11.1Estimating cost of capital for Country Road Ltd18
11.2Value estimates of Country Road Ltd19
11.3Sensitivity analysis20
Conclusion and recommendation21
Appendix 1 Country Road, its competitors and retail industry22
Appendix 2 Financial Strength23
Appendix 3 Management Strength24
Appendix 4 Profitability24
Appendix 5 Investment Management24
Appendix 6 Accounting Analysis Summary25
Appendix 7 Calculation of a Beta for Country Road Ltd26

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* Executive summary

The objective of this report is to provide investment recommendations for Country Road Pty Ltd (CR). CR currently has a strong brand reputation and continues to grow by opening new stores and currently operating in prime retail locations across Australia, New Zealand and South Africa. The report begins with exploring CR’s internal and external environment and assessing CR’s overall strategic position in the Australian retail environment. Also the report provides an accounting analysis, which identifies CR’s performance, financial strengths and inherent risks using financial analysis. This analysis highlights the company performance during the past three years and compares it with CR’s competitor (Oroton Group) by conducting time-series and cross-sectional analysis. Moreover, the report conducts forecasting and evaluates the value of the company. The evaluation focuses on estimating future performance of CR by applying assumptions based on CR’s performance in the current environment. Lastly, sensitivity and scenario analysis is performed to estimate CR’s future performance in three possible market conditions. This material based upon information that we consider being reliable, but does not warrant its completeness or accuracy, and should not rely upon as such. Assumptions, opinions and estimates constitute our judgement as of the date of this material and are subject to change without notice. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any security of financial instrument. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation. Before acting on any recommendations in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. This investment analysis report was prepared from the sources listed in bibliography.

All rights are reserved by 2010. is a registered trademark under the group, 2010.

1.
1. The Retail Industry & its Prospects
Retailing is divided into 14 specific categories each housing specific products and services. This report will focus particularly on ‘Clothing, Footwear and Accessories’, which are CR’s main product lines. Current & Future Overview

Typically, the economy’s performance is a major platform for Clothing and Footwear...
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