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The report is well presented, however lacking in analysis, much of what is discussed is general and descriptive and requires to be more specific to the company. So for example what are they reasons for why revenue has increased?, explain to me. You need to research into the annual reports to find the actual reasons for what you have discussed. It may also be useful to refer to competitors or industry average ratios to give some perspective on how company is performing.

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16/17 Financial Decision Making (Stafford Associates, Ras Al Khaimah) (FINM036-SUMSD) Abdullah Said Khalfan Al Kayoomi MBA Student S.NO: 16443187 1 Introduction Before making a decision with respect to making investment in the share of a company information and news should be gathered and analyzed to understand the prospect of the company (Brigham & Ehrhardt, 2011). According to Bhat (2012), the investmetn decision in the stock of a company should be done ont eh understanding of both-historical financial performance and future financial prospect. Analysis of the financial statements of a company provides a better idea of the historical financial performance of it, and review of the news in the periodicals, consensus growth estimates of the analysts team, trend of historical share prices, and future earning prospect provides a better idea of the future fiancnail prospect of it (Luecke, 2015). This paper aims at conducting an analysis on the hsitorical and future financial perofmrnac and propsect of the Auto Trader Group. Auto Trader Group Plc. is an automotive classified advertising company (Auto Traders, 2017). It was established in 1975 by John Madejski, and Paul Gibbons (Financial Times, 2017). The headquarter of the company is established in Manchester of United States (Google Finance, 2017). Auto Trader Group is mainly engaged in the business of buying & selling of new and used vehicles over internet platform (Auto Traders, 2017). The stock of the Auto Trader Group is enlisted in the London Stock Exchange Market. It is one of the companies contained in the FTSE 250 list (Morningstar, 2017). Based on the review of the historical financial performance and future financial prospect, an investment recommendation will eb made with respect to the stock of the company. 2 PART I: Historical Financial Performance and Position Analysis Besides observing figures in the financial statements, ratio analysis is an important tool to assess the financial performance and position of a company (Brigham & Ehrhardt, 2011). Based on the profitability ratio analysis the financial performance, and based on the liquidity ratios & solvency ratios the financial position of the Auto Trader Group can be assessed. Financial Performance The total revenue of the Auto Trader Group has been increased over the last five years. The increase of the revenue of the company is an indication of expanding of the market shares of the company (figure 1). Net income of the company even though worse in the earlier period but has increased substantially in the last year after repayment of majority debt obligations (reduction of interest burden) (Figure 1). The increase of the net income of the company was mainly due to increase of overall sales, and better management of the operating cost and debt management of the company. The issue is apparent from the increased trend of the net profit margin of the company in the last two years (Figure 2). Increase of profit of the company in the last year is an indication of the recovery of the profitability condition of the Auto Trader Group. Revenue, Net Income, and EPS of Auto Trader Group 300 250 200 150 100 50 0 2016-03 2015-03 2014-03 2013-03 2012-03 0 Earnings per share Revenue Net income 0.02 2012-03 0.01 209 8 0.04 2013-03 0.02 219 20 0.06 0.08 2014-03 0.01 238 10 0.1 2015-03 0.01 256 10 0.12 0.14 2016-03 0.13 282 127 Figure 1: Revenue, Net Income, and EPS of Auto Trader Group 3 Earnings per Share (EPS) of the Auto Trader Group has been increased substantially in the last year due to reduction of interest cost burden (Figure 1). After listing in the market in 2015, in 2016 the company has paid first dividend per share of GBP 0.01 (Morningstar, 2017). Return on Asset (ROA) of the company has been increased substantially in the last year (Figure 2). Increase of the Return on Asset (ROA) is an indication of the improvement of the assets management capacity of the company to generate return for the shareholders. Profitability Ratios of Auto Trader Group 50.00% 45.00% 40.00% 35.00% 30.00% 25.00% 20.00% 15.00% 10.00% 5.00% 0.00% Net Profit Margin Return on Assets (ROA) 2012-03 3.83% 1.71% 2013-03 9.13% 3.74% 2014-03 4.20% 2.41% 2015-03 3.91% 2.42% 2016-03 45.04% 31.91% Figure 2: Profitability Ratios of Auto Trader Group Financial Position Total assets of the Auto Trader Group has been increased consistently over the last five years (Figure 3). This increase of the assets base of the company is an indication of the overall business expansion of the company. In the earlier period, even though Auto Trader Group has high reliance on the debt and high negative equity balance in the last year total liability balance of the company has been decreased substantially and total negative equity balance has been decreased (Figure 3). Overall leverage condition of the Auto Trader Group has been substantially decreased over the last year. The decrease of the debt and improvement of the leverage condition of the company is apparent on the rapid reduction of the long term debt to asset ratio, and total debt ratio of the company (Figure 4). In 2015, Auto Trader Group has moved for listing in the NYSE market, 4 and raise funds to repay its debts obligations. Overall liquidity condition, even though deteriorated in the last year as implied from the decrease of the current ratio and quick ratio in the last year, but still good as implied from the high value of current ratio and quick ratio of the company (Figure 5). The company has high ability to repay its short term debts and obligations when these become due. The reduction of the debt ratio, and increase of the liquidity ratios are indication of the improvement of long term viability and solvency of the Auto Trader Group. Total Assets, Total Liabilities, and Total Equity of Auto Trader Group 1500 1000 500 0 2012-03 2013-03 2014-03 2015-03 2016-03 -500 -1000 Total assets Total liabilities Total stockholders' equity Figure 3: Total Assets, Total Liabilities, and Total Equity of Auto Trader Group Solvency Ratios of Auto Trader Group 300.00% 250.00% 200.00% 150.00% 100.00% 50.00% 0.00% Long-Term Debt Ratio Total Debt Ratio 2012-03 247.22% 266.88% 2013-03 223.18% 242.06% 2014-03 266.75% 280.96% 2015-03 130.68% 142.75% 2016-03 99.50% 112.81% Figure 4: Solvency Ratios of Auto Trader Group 5 Liquidity Ratios of Auto Trader Group 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 Current Ratio Quick Ratio 2012-03 1.05 0.96 2013-03 1.58 1.52 2014-03 1.28 1.15 2015-03 1.51 1.17 2016-03 1.19 0.77 Figure 5: Liquidity Ratios of Auto Trader Group The financial performance and position of the Auto Trader Group has been improved substantially in the last year after debt repayment policy of the company. Improvement of the financial performance of the company is implied from the profit measure figures, and profitability ratios of the company. Improvement of the financial position of the company is implied from the decrease of overall liabilities, increase of total shareholder’s equity, and improvement of liquidity & solvency ratios of the company. 6 PART II: Investment Prospect Analysis The current share price of the Auto Trader Group in the market is GBP 408.32 (Google Finance, 2017). The current market capitalization of the Auto Trader Group in the market is GBP 3.98 billion (Google Finance, 2017). Over the last year after listing, the stock of the Auto Trader Group has been consistently increased (Figure 6). A positive trend can be observed from the long term trend of the price increased can be observed from the historical share price of the company (Figure 6). Over 2016, the share price of the Auto Trader Group has been increased by 27.34%. Figure 6: Historical Share Price of Stock of Auto Trader Group (Google Finance, 2017) The Net Asset Value (NAV) per Share of the Auto Trader Group is GBP 0.398 (Morningstar, 2017). The price/sales ratio of the Auto Trader Group is 13.15 times. The current Price/ Earnings Ratio of company in the market is 28.54 times. This P/E ratio indicates the investors are willing to pay GBP 28.54 against per GBP income of the company. As compared to industry average P/E ratio, the P/E ratio of the Auto Trader Group is higher. From the higher P/E ratio of the Auto Trader Group, it is implied that the investors are perceiving higher growth estimate for the Auto Trader Group, and are ready to pay more price for the share of it. Better 7 financial performance of the Auto Trader Group results in posting of its stock as ‘Cheery’ in the market to the investors. The volume traded of the share has been consistently increased over the last three years (Figure 7). Figure 9: Share Volume of Auto Trader Group (Inestors Sonicle, 2017) Total revenue of the Auto Trader Group revenues for the 2016 was GBP 281.60 million. In 2016 total revenue of the company has been increased by 10.04% than the prior year. In 2017 and 2018 the revenue of the company are expected to be GBP 310.04 million, and GBP 331.34 million respectively (Financial Times, 2017). The reported EPS of the Auto Trader Group was GBP 0.1284 in 2016. In the next year two years the EPS of the company are expected to increase by 15.40%, and 17.46% respectively (Financial Times, 2017). The Yahoo Finance’s analysts have estimated consensus EPS growth of the Auto Trader Group in the upcoming five years as 18.41% (Yahoo Finance, 2017). In 2016, DPS (dividend per share) of the Auto Trader Group PLC was 0.02 GBP. The 17 analysts covering the company expect dividends of 0.05 GBP (Growth of 226.67%) for the upcoming year. As per market analysts, the financial performance of the Auto Trader Group is expected to improve further in the future (Financial Times, 2017). 8 Figure 8: Consensus Revenue Forecast of Auto Trader Group (Financial Times, 2017) Figure 9: Consensus Earnings Forecast of Auto Trader Group (Financial Times, 2017) Figure 10: Consensus Dividend Forecast of Auto Trader Group (Financial Times, 2017) The condition of the auto industry of the UK is expected to be better in the future. Even with Brexit decision, the sales in the vehicles in the domestic market, and export market was stable. In 2016, the auto market has experienced growth of 3.9% (Atradious, 2016). Based on the analysis of the Atradious, the overall credit risk, financing, and business condition of the auto industry of the UK is very good (Figure 11). By the end of 2020 total market of the automotive market of the UK is expected to be increased by 22% than the current size of 1.5 million vehicles (Henry, 2015). 9 The number of online users in the worldwide is increasing continuously. People now highly prefer to shop over the internet. Currently, Auto Trader Group is the largest digital automotive marketplace in the UK (Auto Traders, 2017). It has created the largest pool of vehicle sellers (listing more than 437,000 cars each day) (Auto Traders, 2017). Given the high growth prospect of the industry, and better efficiency of the Auto Trader Group in managing of its financial resources, the market shares and profitability of the Auto Trader Group is expected to increase in the upcoming period. Figure 11: Analysis of the Current Condition and Prospect of the Automobile Industry of UK (Atradious, 2016) 10 In terms of key financial data and information, the performance of the Auto Trader Group is better than the average companies in the industry (Figure 12). Figure 12: Market Information of the Stock of Auto Trader Group (Financial Times, 2017) Nearly about 34.12% of the total share outstanding of the Auto Trader Group is held by the institutional investors. The stock of the company has been picked by some world famous investment banking company (Figure 13). As compared to those of other peer companies the holding of more shares by the institutional is a good sign for a company in the market. The holding of more shares of the Auto Trader Group by the institutional investors is an indication of the fact the institutional investors is perceiving good prospect of the stock and picking up the stock in their portfolio. 11 Figure 13: Institutional Investor Shareholding of the Auto Trader Group (Financial Times, 2017) Auto Trader Group has developed strong internal code of conduct & corporate governance for managing of the internal business operation and employee activates properly. There are explicit guidelines and principles for philanthropy and environmentally sustainable operation practices of the organization (Auto Traders, 2017). The expense incurred for corporate social responsibility (CSR) of the company has been increased over the last three years. The management of the company always try to uphold of the integrity of the company and running the business in sustainable manner. The strong internal code of conduct & corporate governance, and active CSR involvement indicate high accountability of the resources managed by the executives of the 12 company & high transparency in reporting, and good corporate citizenship of the company. The strong internal code of conduct & corporate governance, and active CSR involvement of the company make it as a good investment choice to the investors in the market. As on April 28 2017, the consensus forecast of pool analysts of seventeen research companies, covering Auto Trader Group, provided option that the stock of the Auto Trader Group will outperform the market, and provided buy or hold recommendation with respect to stock investment in Auto Trader Group (Financial Times, 2017). The analysts of the Investors Chronicle have also provided hold recommendation for the stock of the Auto Trader Group (Atradious, 2016). The Yahoo Finance’s analysts Team provided a strong buy recommendation for stock of Auto Trader Group (Yahoo Finance, 2017). The 16 analysts, covering the analysis of the stock Auto Trader Group PLC, have predicted a median target price of the stock of the company of GBP 440.00, high estimate of GBP 530.00 and low estimate of GBP 360.00 (Financial Times, 2017). Based on the median expected price, the stock price is expected to be increased by 9.70% (Financial Times, 2017). Figure 14: Consensus Recommendation for Stock of Auto Trader Group (Financial Times, 2017) 13 Figure 15: Consensus Stock Price Forecast of Auto Trader Group (Financial Times, 2017) 14 Conclusion and Recommendation Based on the overall financial performance and position analysis of the Auto Trader Group, it can be said that even though overall financial performance and position of the Auto Trader Group were not god in the earlier period, the financial performance and position of the company is recovering. The company has experienced a tremendous growth in the last financial period. The financial performance and position of the Auto Trader Group is expected to improve in the upcoming period. The strong internal code of conduct & corporate governance, and active CSR involvement enables the investors to perceive high transparency in the management of resources & reporting, and storing corporate citizenship of the company. Based on the review of the periodicals, consensus growth estimates of the analysts' team, trend of historical share prices, and future earning prospect, a hold (if already purchased) or buy recommendation can be made for the stock of Auto Trader Group. A hold or buy recommendation is justifiable when the investors perceive high prospect of the company. 15 References Atradious. (2016, October 27). Retrieved April 27, 2017, from Market Monitor Automotive United Kingdom 2016: https://group.atradius.com/publications/market-monitor-automotiveunited-kingdom-2016.html Auto Traders. (2017). Retrieved April 30, 2017, from Abut Us: http://about-us.autotrader.co.uk/ Bhat, S. (2012). Financial Management: Principles and Practice. New Delhi: EXCEL BOOKS. Brigham, E. F., & Ehrhardt, M. C. (2011). Financial Management: Theory and Practice. South California: South-Western Cengage Learning. Financial Times. (2017, April 28). Retrieved April 30, 2017, from Auto Trader Group PLC: https://markets.ft.com/data/equities/tearsheet/profile?s=AUTO:LSE Google Finance. (2017). Retrieved April 29, 2017, from Auto Trader Group PLC: Summary: https://www.google.com/finance?cid=882492039568036 Henry, I. (2015). The future of UK automotive manufacturing in 2025 and beyond . Long-Term forecast paper for The Society of Motor Manufacturers and Traders (SMMT). Retrieved from The future of UK automotive manufacturing in 2025 and Beyond. Inestors Sonicle. (2017). Retrieved April 29, 2017, from Auto Trader Group PLC: Stock Analysis: http://markets.investorschronicle.co.uk/research/Markets/Companies/Summary?s=AUTO :LSE Luecke, R. (2015). Finance for Managers. New York: Harvard Business School Publishing. Morningstar. (2017). Retrieved April 30, 2017, from FTSE 250 Index Shares: http://www.morningstar.co.uk/uk/equities/indexstockprices.aspx?index=FTSE_250 Morningstar. (2017). Retrieved April 30, 2017, from Auto Trader Group PLC (ATDRF): Income Statement: http://financials.morningstar.com/income-statement/is.html?t=ATDRF Morningstar. (2017). Retrieved April 29, 2017, from Auto Trader Group PLC (ATDRF): Balance Sheet: http://financials.morningstar.com/balancesheet/bs.html?t=ATDRF®ion=usa&culture=en-US Yahoo Finance. (2017). Retrieved April 30, 2017, from Auto Trader Group plc (AUTO.L): Analysts : https://uk.finance.yahoo.com/quote/AUTO.L/analysts?p=AUTO.L 16 Appendices Appendix 01: Financials of Auto Trade Group Plc. AUTO TRADER GROUP PLC BALANCE SHEET Fiscal year ends in March. GBP in millions except per share data. Revenue Gross profit Operating expenses Sales, General and administrative Other operating expenses Total operating expenses Operating income Interest Expense Other income (expense) Income before taxes Provision for income taxes Net income from continuing operations Net income from discontinuing ops Net income Net income available to common shareholders Earnings per share Basic Diluted Dividend Per Share Basic 2012-03 209 209 2013-03 219 219 2014-03 238 238 2015-03 256 256 2016-03 282 282 8 93 101 108 78 -7 23 11 12 -4 8 8 8 102 110 109 85 -1 23 9 14 7 20 20 7 132 139 99 83 -12 4 6 -3 13 10 10 123 16 96 112 170 13 -2 155 28 127 0.01 0.01 0.02 0.02 0.01 0.01 0.01 0.01 0.13 0.13 0 0 0 0 0.01 123 133 78 -44 11 2 8 2 10 10 127 127 17 AUTO TRADER GROUP PLC BALANCE SHEET Fiscal year ends in March. GBP in millions except per share data. Assets Current assets Cash Cash and cash equivalents Total cash Receivables Prepaid expenses Other current assets Total current assets Non-current assets Property, plant and equipment Gross property, plant and equipment Accumulated Depreciation Net property, plant and equipment Goodwill Intangible assets Deferred income taxes Other long-term assets Total non-current assets Total assets Liabilities and stockholders' equity Liabilities Current liabilities Accounts payable Taxes payable Other current liabilities Total current liabilities 2012-03 2013-03 2014-03 2015-03 2016-03 49 49 28 7 3 86 110 110 29 6 2 147 13 13 40 7 8 68 22 22 33 16 0 71 10 10 29 22 0 62 25 -19 6 1065 -698 5 5 382 468 22 -17 5 1069 -695 6 4 388 535 19 -14 4 434 -95 5 20 -12 8 433 -103 5 22 -14 7 313 11 4 348 415 343 414 335 398 6 15 62 82 7 16 70 93 7 12 34 53 5 13 29 47 8 26 18 52 18 Non-current liabilities Long-term debt Deferred taxes liabilities Pensions and other benefits Other long-term liabilities Total non-current liabilities Total liabilities Stockholders' equity Preferred stock Common stock Additional paid-in capital Retained earnings Accumulated other comprehensive income Total stockholders' equity Total liabilities and stockholders' equity 1157 1 1 7 1166 1249 1194 1 1107 1 541 1 396 0 7 1202 1295 5 1113 1166 2 544 591 1 397 449 177 177 176 10 1 -1054 95 -780 468 2 -1034 95 -760 535 2 -1023 95 -751 415 144 -789 469 -176 414 971 -1032 -52 398 2012-03 2013-03 2014-03 2015-03 2016-03 1.58 1.28 1.51 1.19 Quick Ratio Current Assets / Current Liabilities 1.05 (Current Assets - Prepaid Expense - Inventory) / Current Liabilities 0.96 1.52 1.15 1.17 0.77 Profitability Ratios Net Profit Margin Return on Assets (ROA) Net Profit / Total Revenue Net Income / Total Assets 3.83% 1.71% 9.13% 3.74% 4.20% 2.41% 3.91% 2.42% 45.04% 31.91% Leverage Ratios Long-Term Debt Ratio Total Debt Ratio Total Term Debt / Total Assets Total Debt / Total Assets 247.22% 266.88% 223.18% 242.06% 266.75% 130.68% 99.50% 280.96% 142.75% 112.81% Appendix 02: Ratios of Auto Trade Group Plc. Ratios Liquidity Ratios Current Ratio Formula 19
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16/17 Financial Decision Making
(Stafford Associates, Ras Al Khaimah)
(FINM036-SUMSD)

Abdullah Said Khalfan Al Kayoomi
MBA Student
S.NO: 16443187

1

Introduction
Before making a decision with respect to making investment in the share of a company
information and news should be gathered and analyzed to understand the prospect of the company
(Brigham & Ehrhardt, 2011). According to Bhat (2012), the investmetn decision in the stock of a
company should be done ont eh understanding of both-historical financial performance and future
financial prospect. Analysis of the financial statements of a company provides a better idea of the
historical financial performance of it, and review of the news in the periodicals, consensus growth
estimates of the analyst’s team, trend of historical share prices, and future earning prospect
provides a better idea of the future fiancnail prospect of it (Luecke, 2015).
This paper aims at conducting an analysis on the historical and future financial perofmrnac
and propsect of the Auto Trader Group. Auto Trader Group Plc. is an automotive classified
advertising company (Auto Traders, 2017). It was established in 1975 by John Madejski, and Paul
Gibbons (Financial Times, 2017). The headquarters of the company is established in Manchester
of United Kingdom (Google Finance, 2017). Auto Trader Group is mainly engaged in the business
of buying & selling of new and used vehicles over internet platform (Auto Traders, 2017). The
stock of the Auto Trader Group is enlisted in the London Stock Exchange Market. It is one of the
companies contained in the FTSE 250 list (Morningstar, 2017). Based on the review of the
historical financial performance and future financial prospect, an investment recommendation will
eb made with respect to the stock of the company.

2

PART I: Historical Financial Performance and Position Analysis
Besides observing figures in the financial statements, ratio analysis is an important tool to
assess the financial performance and position of a company (Brigham & Ehrhardt, 2011). Based
on the profitability ratio analysis the financial performance, and based on the liquidity ratios &
solvency ratios the financial position of the Auto Trader Group can be assessed.
Financial Performance
The total revenue of the Auto Trader Group has increased over the last five years. For
example, the total revenues in 2015 was £256 million whereas it was £282 million in 2016,
which represents an increase of 10%. This revenue growth was accomplished through the
positive contribution of the company’s revenue streams, which include trade, consumer services,
as well as display advertising. In trade, the company raised the value that was delivered to its
customers by improving the number of cross platform visits, as well as engaging consumers on a
higher level. This led to a 7.5% growth in advert views, which translates to additional six
vehicles being viewed in the market every second. The 4% increase in consumer services was
encouraging bearing in mind the competitive nature of the sector. This was due to the company’s
monitoring services products, which were offered to customers at the point of purchase. Finally,
the display advertising recorded the highest performance with revenue rising by 23%. This
resulted from the company’s focus on improving relationships with other agencies, as well as
improving advertising formats. The increase of the revenue of the company is an indication of
expanding of the market shares of the company (figure 1). Net income of the company even
though worse in the earlier period but has increased substantially in the last year after repayment
of majority debt obligations (reduction of interest burden) (Figure 1). The increase of the net
income of the company was mainly due to increase of overall sales, and better management of

3

the operating cost and debt management of the company. The issue is apparent from the
increased trend of the net profit margin of the company in the last two years (Figure 2). Increase
of profit of the company in the last year is an indication of the recovery of the profitability
condition of the Auto Trader Group.

Revenue, Net Income, and EPS of Auto Trader Group
300
250
200
150
100
50
0

2016-03
2015-03
2014-03
2013-03
2012-03

0
Earnings per share
Revenue
Net income

0.02
2012-03
0.01
209
8

0.04
2013-03
0.02
219
20

0.06

0.08
2014-03
0.01
238
10

0.1
2015-03
0.01
256
10

0.12

0.14
2016-03
0.13
282
127

Figure 1: Revenue, Net Income, and EPS of Auto Trader Group
Earnings per Share (EPS) of the Auto Trader Group has been increased substantially in
the last ...


Anonymous
Really helpful material, saved me a great deal of time.

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