The Financial Analysis and Valuation of Stock Spirits Group
Chapter One: Introduction
Introduction
Stock Spirits Group is one of the leading producers of spirit and liqueurs in Eastern and Central Europe. The Stock Spirits Group Company operates typically in Poland, Italy, Croatia, Slovenia and the Czech Republic. The Stock Spirit Group Business was founded after the Oaktree Capital Management Company acquired Polmos Lublin Company in 2006 and then merged it with a company from the Czech Republic known as the Eckes & Stock company In 2008. It took Stock Spirits Group five years for it to be subjected to the initial public offering. The Stock Spirits Group Business has its headquarters in the United Kingdom and has its production facilities in Poland, Italy, Czech Republic and Germany. The company produces over 45 brands of spirits, some of these brands are vodka 1906, Amundsen, Amundsen Expedition, Balsam Bialy, Bozkov Vodka and Keglevich. The Stock Group Business also exports beverage’s to over 50 countries worldwide. As a result of this, the company is now experiencing a higher growth rate with a global sales volume of over one hundred and twenty-five million litres per year.
The Economic and Financial Environment of the Stock Spirit Group
Technological Environment
The United Kingdom is one of the world’s leading technological ecosystem, with a lot of companies using technology to optimize their production capacity. In these modern days, the UK companies are going ahead by implementing artificial intelligence in their production sector and also using the 5G network to communicate with their worldwide customers. The Stock Spirits Group is one of the businesses that is using technology efficiently to disrupt its competitor in the UK. The company applies a lot of technology in its production facility, and this helps improve the company’s ability to produce more and quality beverages for their customers.
Political Environment
The political environment in a country usually plays a vital role in determining how well a specific company will perform in its long term goals. The Stock Spirits Group is indulged in different markets across the world; this means that the company has a team of experts in the law who are well knowledgeable with the political systems of these countries. The United Kingdom has been one of the leading markets for the Stock Spirits Group has a stable political environment. Therefore the Stock Spirits group does not face any political disruption in the UK while conducting its business operations. In addition to this, the UK does not have any dispute with its neighbouring countries; this means that the Stock Spirits Group can comfortably export its products from the UK to the other neighbouring countries.
Economic Environment
The Economic environment usually covers factors such as inflation, interest rate, foreign exchange rate and the savings rate. The UK’s economy is typically a world-class economy that is ranked 5th, and due to this, the Stock Spirits Group can operate efficiently. In the UK, the economic environment is favourable to the company due to a low unemployment rate, flat inflation rate, flat interest rate and also due to the high growth rate.
Socio-cultural Environment
Usually, people’s ways of doing things can impact the organization either positively or negatively. The UK is known to have citizens with high ethical standards, and due to this the Stock Spirits Group marketers have designed a marketing message, that is meant to encourage the UK customers to buy their beverages. A lot of people in the UK enjoys typically taking drinks during their leisure time; this has significantly promoted the Stock Spirits group.
The Markets that the Stock Spirits Group Operate
Just like any other spirit producer, the Stock Spirits Group performance is influenced by very many factors. Some of these factors are; the regulatory body in a particular country, consumer’s disposable income, consumer’s confidence, national economic performance and the demographics in a specific country.
Poland is ranked as the third-largest vodka market in the world and also, the number one vodka.
The market in Europe. It is so far the largest source of revenue and profit to the Stock Spirits Group Business. During the 2019 period, the Stock Spirits Group was able to acquire revenue amounting to 171 million Euros from Poland, which was a 13% increase from the 2018 period, which had generated a revenue of 152.6 million Euros. In the 2019 period, Poland also had an EBITDA adjustment of 43.1 million Euros, which was a 7% increase from the 40.4 million Euros EBITDA adjustment in the 2018 period. This EBITDA adjustment leads to an increased revenue was as a result of the growth in the national economy during the 2019 period, which led to the fall of the unemployment rate and a corresponding increase in disposable income. Vodka was the leading revenue generator to the Stock Spirits Group followed by Whisky. During the 2019 period, it was quite clear that the Stock Spirit Group in Poland was outperforming in the vodka market, with continuous growth in shares for 29 consecutive months. Due to this, the Stock Spirit’s Group shares for vodka Poland grew from 26.8% (for 2018) to 29.0% in 2019.
Italy is another well-known and competitive market for the Stock spirit Group. During the 2019 period, Italy had generated 26.9 million Euros of revenue for the Stock Spirits Company, which was a 4% growth from 25.8 million Euros for the 2018 period. Despite the increase in revenue, the Stock Spirits Group experienced a 19% decrease in its EBITDA adjustments in the 2019 period, after they had a 3.6 million Euros EBITDA adjustment, which was a decline from 4.4 million Euros EBITDA adjustment of 2018.
The Czech Republic is another country in which the Stock Spirits Group performs exceptionally well; it is so far their second-largest market. During the 2019 period, Czech Republic was able to generate 81.3 million Euros for the Stock Spirits Group, which was an 11% increase from the 2018 period, which had produced 73.2 million Euros. Also, in 2019 the Czech Republic had a 24.4 million Euros EBITDA adjustment, which was a 13% increase from the 2018 period, that had generated 21.6 million Euros EBITDA adjustment. In terms of shares, Stock Spirits Group had an increased growth value of 33.0% to 34.3% and also an increased volume of shSharerom 34.7% to 35.8%.
Stock Spirits Group also operates in other markets such as Bosnia & Herzegovina, Croatia, Bosnia, Slovakia, etc. In these other markets, the Stock Spirits Group was able to get a revenue of 32.5 million Euros in the 2019 period, which was a 5% increase from the 2018 period that had generated a revenue of 30.9 million Euros. The Stock Spirits Group, however, experienced a 5% decrease in the EBITDA adjustment after they acquired a 5.4 million Euros in 2019 which was a decline from the 5.7 million Euros EBITDA adjustment achieved in 2018.
Overview of the Main Competitors of the Stock Spirits Group
Berentzen-Gruppe is one of the leading competitors of the Stock Spirits Group. This company is known for its production of fruits and grain-based liquors in Europe. Berentzen-Gruppe also produces other non-alcoholic beverages such as lemonade and mineral water. This primary company market is located in Germany but makes sales in entire Europe.
Olvi is yet another top competitor of the Stock Spirits Group, the Olvi brewers mainly operate in Finland, and it is currently the top Finnish owned brewery and soft drinks company in Finland. The Olvi Company offers both alcoholic and non-alcoholic drinks. These drinks include; kvass, sports beverages, soft drinks, juice, mineral waters, beers, ciders and other beverages. Olvi company usually exports it’s beverages to both wholesale and retail customer in Europe.
Another top competitor for the Stock Spirits Group is the Heaven Hill Distilleries. The Heaven Hils Distilleries is one of America’s largest producers of distilled spirits. The Heaven Hill Distilleries was founded in 1950 and has grown to become one of the leading exporters of distilled spirits. Heaven hill Distilleries Company is known for its innovative and relevant products. The company has increased drastically due to the high amount of exports it does, with more than 100 countries that it does export its distilled drinks. Due to this high number of commodities, the Heaven Hill Distilleries becomes a significant competitor to the Stock Spirits Group. Some of the most successful distilled spirits for the Heaven Hill Distilleries include Burnett’s Vodka, The Christian Brothers Brandies, Lunazul Tequila, Rittenhouse Rye Whisky, among others.
The fourth Stock Spirits Group competitor is the Laurent Perrier, a company that is well known in creating unique and elegant Champagnes. The Laurent Perrier is a company with over 200 years of producing champagne. This company’s headquarters are in France and is a leading exporter in Europe. The Laurent Perrier champagne holds a record of the largest family-owned brands since its champagnes are mainly taken during meals.
Chapter Two: Financial Performance and Position of the Company
Profitability Analysis
In this section, we will be analyzing the profitability of Stock Spirits Group. The profitability analysis ratios are the ratios that are used by the investors and the company’s analysts to measure and evaluate the ability of the company to generate a profit using the assets that it has been provided. In the profitability analysis, we will take a look at the margin ratios. The margin ratio is to help us assess how best the Stock Spirits group can best turn their sales into a profit. The profitability analysis ratio will also provide us with the return ratios, which will show us the ability of the Stock Spirits Group to generate returns to the shareholders. Finally, we will take a look at how the Stock Spirits Group divides its net income among its investors in the form of dividends.
Table 1: Profitability ratios
| STOCK SPIRITS GROUP Profitability Ratios | ||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | Average | |
| Margins | ||||||
| Gross Profit Margin | 52.59% | 53.55% | 50.68% | 49.08% | 47.31% | 50.64% |
| Operating Profit Margin | 17.71% | 19.88% | 15.38% | 17.33% | 16.2% | 17.3% |
| EBITDA margin | 23.84% | 18.64% | 20.12% | 15.16% | 16.17% | 18.79% |
| Net Profit Margin | 12.24% | 7.39% | 10.90% | 4.20% | 9.06% | 8.76% |
| Returns | ||||||
| Return on Equity | 10.83% | 5.48% | 7.97% | 3.22% | 7.80% | 7.06% |
| Return on Assets | 4.78% | 2.76% | 4.22% | 1.67% | 4.35% | 3.56% |
| Return on Invested Capital | 8.56% | 4.63% | 6.08% | 2.67% | 6.83% | 7.24% |
| Other Ratios | ||||||
| Dividend Payout Ratio | 24.04% | 37.08% | 45.01% | 48.05% | 60.97% | 43.03% |
| Dividend Yield | 0.44% | 1.94% | 2.97% | 2.54% | 3.63% | 2.30% |
From the above table, we have used the Gross profit margin to determine the profitability analysis of the Stock Spirits Group. The Gross profit margin a method that is generally used by the analysts to assess a company’s financial health. The Gross profit margin is calculated by subtracting the cost of goods sold from the Net sales, and it is usually expressed in percentage. From the table, it is quite clear that the Stock Spirits Group has maintained a consistent gross profit margin for the last five years, with an average of 50.64%. This high gross profit margin is not that high in all the countries that the Stock Spirits Group operates. For instance, in Italy, there is a higher rate of competition from the local Italians beverages. The operating margin is another method that is generally used in profitability analysis. The operating margin (also known as the Return on sales) is usually used by analysts to determine the amount of profit a company can generate after the costs of production has been subtracted. The operating margin is generally calculated before paying any taxes or interests. OPM is usually an excellent indicator to the investors and lenders of the particular company since it explains how the company has been managed and whether the company is free from risks. The operating margin is usually calculated by dividing the operating income by the sales revenue generated. The OPM is traditionally expressed in percentage and can be used to compare firms in the same industry. The operating profit is also called the EBIT, which stands for the earnings before interest and taxes. The Earnings before interest and taxes is the income left on the income statement after the overhead costs, and the costs of operations have been subtracted.
The EBIT is calculated as follows; EBIT= Gross Income-Depreciation and amortization. Over the past five years, the Stock Spirits Group has an average operating profit margin of 17.3%. These values are seen to be either increasing or decreasing each YearYear. In the entire beverage industry, this operation profit margin is high, and it indicates to any investor that the Stock Spirits Group has less financial risks. It is, however, essential that the Stock Spirits Group, to continuously focus on increasing the operating profit margin since it highly contributes to the profitability margin. The other ratio that we used in the profitability margin analysis is the EBITDA margin. EBITDA stands typically for earnings before interest, taxes, depreciation and amortization. The EBITDA margin is a well-known method that analysts use in measuring the company’s operating profit of the revenue it generates. EBITDA can be used by analysts to compare companies in the same industry. This margin is typically calculated by dividing the income totalling with the EBITDA. In the past five years, the Stock Spirits Company had a slightly higher EBITDA margin of an average of 18.79%. The EBITDA average margin shows that the company has somewhat lower operating expenses to the total revenue generated. The Stock Spirits Group should be more focused on increasing the EBITDA margin to a high percentage of above 30%, and by doing soo, the company will have a more exceptional ability to compete with other global producers of spirits and other beverages. The last method that we used in calculating the margins is the net profit margin, which is the amount of profit or net income expressed in percentage of revenue. The net profit margin is usually calculated by the net income been divided by the revenue then multiplied by 100%, in which the net income is calculated as Net Income = Revenue – Cost of Goods Sold (COGS) – Operating and other expenses – Interest – Taxes.
For the past five years, the Stock Spirits Group had an average net profit margin of 8.76%. From the table above, it is quite clear that the Net Profit margin is drastically rising and falling; this is usually contributed by a lot of competitions in the Stock Spirits Group foreign markets. The net profit margin is the right way for the investors to use in assessing the Stock Spirits company’s management and determine whether the company is generating enough profit from the resources that they have invested. It also helps them know whether the company’s management can contain overhead costs and other expenses.
The returns on EquityEquity is another approach that is used in profitability analysis of the Stock Spirits Group. The Return on Equity is an excellent method of measuring the financial performance of a company and is generally considered as the Return on the net assets. We were able to calculate the Stock Spirits return on EquityEquity by dividing the net income of the company by the shareholders’ EquityEquity. For the past five years, the Stock Spirits Group had an average Return on Equity of 7.06%. For instance, during the 2019 period, the Stock Spirits Group had a net profit of 28 million Euros, and the company’s shareholders equity was 361 million Euros. By using this figures, we were able to find the Return on Equity by diving 28 million Euros with 361 million Euros and then multiplying the answer by 100% to get 7.8 %( which was 2019 return on EquityEquity). From the table, it is quite clear that the company has been experiencing a consistent increase in the ROE.this means that the company is increasing its profit each YearYear.
Despite the rise in the Return on Equity in the 2019 period, the stock Spirits group 7.8% ROE was far much lower from the industries average 17% ROE. The other method that we used in profitability analysis is the Return on Assets method, which is usually used by the investors and analysts to tell how good a company’s management is in utilizing the assets that it has been provided with, to generate the right amount of profit. Unlike Return on Equity, the Return on assets metrics usually considers debt. The Return on assets is calculated by dividing the net income with the total assets. For the past five years, the Stock Spirits Group had a lower average return on assets of 3.56% this indicates that the Stock Spirits Group is somehow underperforming and any investor would consider investing in bonds or other beverage companies. The other method that we used was the Return on invested capital. This method is used in measuring how best a company is in allocating the available capital to generate profit. The ROIC method can be used to compare companies in the same industry on how best they can generate income to their investors. The Return on invested capital is calculated by dividing the Net Operating Profit after tax with the invested capital. The Net Operating Profit after tax is calculated by subtracting the dividends from the net income. If a company is having a return on invested capital higher than the Cost of Capital, it means that the company is experiencing steady and healthy growth. Still, if the Return on invested capital is lower than the Cost of Capital, it means that the business model been used in that company is not stable. In the previous five years, the Stock Spirits group had an average Return on invested capital of 7.24%, from the table, it is quite clear that the ROIC is drastically falling and raising.
Liquidity and Solvency Ratios
Liquidity Analysis
In this section, we will be looking into liquidity and solvency analysis. The liquidity ratios will help us express the Stock Spirits Group ability to repay the short-term creditors out of its total cash that it generates. The liquidity ratio is calculated by dividing the total amount of capital that the company has with the short-term borrowings. On the other hand, the solvency analysis is used by both business analysts and investors to determine the business ability to repay its debts as they approach the due date. On the other hand, Solvency analysis is a critical analysis of business management since it enables the business to determine both short and long term cash flows.
Table 2: Liquidity and Solvency Ratios
| STOCK SPIRITS GROUP Liquidity and Solvency Ratios | ||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | Average | |
| Liquidity Ratios | ||||||
| Cash Ratio | 0.83 | 1.06 | 1.35 | 1.08 | 1.13 | 1.09 |
| Current ratio | 1.8 | 1.7 | 1.5 | 1.4 | 1.52 | 1.58 |
| Quick Ratio | 1.46 | 1.43 | 1.32 | 1.26 | 1.24 | 1.35 |
| Solvency Ratios | ||||||
| Long term debt to Equity | 36.4% | 38.6% | 32.3% | 23.2% | 29.2% | 31.94% |
| Long term debt to capital | 17.6% | 20.9% | 28.0% | 17.5% | 16.8% | 23.52% |
| Total debt/total assets | 49.31% | 47.37% | 45.01% | 41.56% | 46.19% | 45.89% |
| Total debt/Equity | 106.23% | 93.61% | 98.12% | 102.27% | 103.96% | 100.84% |
| Total debt/Capital | 31.91% | 27.26% | 23.63% | 22.62% | 24.79% | 25.84% |
The first method that we used to measure the liquidity ratio of the Stock Spirits Group business was the cash ratio. The cash ratio method is used to measure the company’s ability to repay short term debts. The Cash ratio information can be used by the creditors to decide how much money they can offer a company in the form of debt. The cash ratio can be calculated by dividing cash and cash equivalents with the current liabilities. The cash ratio is usually expressed in numbers more significant or less than one. For the last five years, the stock Spirits Group business had an average cash ratio of 1.09. The average cash ratio of the Stock spirits Group indicates that the company had more cash and cash equivalents than the current liabilities. From this average cash ratio, we can conclude that the company has sufficient money on hand to pay off the short term debts. If Stock Spirits Group has a cash ratio of less than 1, it means that the company does not have enough cash on hand to repay its short term debtors, for example, during the 2015 period. The other method that we used to determine the liquidity ratio of the Stock Spirits Group is the Current ratio, which is used for measuring the company’s short term debts. The current rate simply tells investors how best the company utilizes its existing assets to satisfy its obligations. The current ratio is also referred to as the working capital, and a lot of analysts considers it as an appropriate way of comparing companies in the same industry. The current ratio is calculated by dividing the existing assets with the current liabilities. For the last five years, the Stock Spirits Group had a Current ratio of 1.58. From this ratio, we can conclude that the company can meet and pay its current debts. Taking for instance in the 2019 period the Stock Spirits had existing assets amounting to 251 million Euros and current liabilities of 165.4 million Euros, using this figures we can be able to find the current ratio by dividing 251 with 165.4 million which gives us a current ratio of 1.5. The third method that can be used in determining the liquidity ratio of the Stock Spirits Group is the Quick ratio. Just like the other methods, the liquidity ratio is used to measure the company’s ability to pay and meet its short term debt. Quick rate is calculated by adding cash and cash equivalents to marketable securities and then adding it to accounts receivable. The result is then divided by the current liabilities. For the past five years, the Stock Spirits Group had an average quick ratio of 1.35. This ratio indicates that the Stock Spirits Group business is well equipped with enough assets to be instantly liquidated to pay its current liabilities.
This section will be dealing with the Stock Spirits Group solvency analysis. The first method in this section is the long term debt to equity ratio, which is a method used to determine the amount of leverage the company is taking. The long term debt to EquityEquity is calculated by dividing long term debt with the shareholder’s equity. For the last five years, the Stock Spirits group had an average long term debt to equity ratio of 31.94%. From the above table, we can see that the long term debt to equity ratio is drastically rising and falling. Usually, when the long term debt to equity ratio of the Stock Spirits Group is high, it indicates that the company has more obligation in its capital structure. The other method for analyzing the Stock Spirits ratio is the long term debt to capital, which is used to show the financial leverage of the firm. The long term debt to capital ratio is used by a lot of investors to analyze and determine the investment risks that do exists in a particular company. The long term debt to capital ratio is calculated by dividing debt with the sum of liabilities and the shareholder’s equity. From the table above, the Stock Spirits Group had a long term debt to capital average of 23.52%. The long term debt to capital seems to decline in the last two years, indicating that the company has a lower chance of bankruptcy.
Asset Management Analysis.
In this section, we will take a look into the asset management ratios of the Stock Spirits Group. The asset management ratio will help us know how well the Stock Spirits Group is in utilizing the assets that it has to generate revenue. In the asset management ratio, we will use different methods, such as the fixed turnover ratio and the inventory turnover ratio.
Table 3: Asset Management Ratios
| Stock Spirits Group Asset Management Ratios | ||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | Average | |
| Accounts Receivable Turnover | 2.92 | 2.16 | 2.31 | 2.52 | 2.13 | 2.41 |
| Inventory Turnover | 4.4 | 5.2 | 6.1 | 5.1 | 4.5 | 5.06 |
| Debtors Turnover | 2.89 | 3.24 | 2.89 | 3.44 | 3.79 | 3.25 |
| Fixed assets turnover ratio | 7.01 | 6.13 | 6.10 | 5.54 | 6.25 | 6.21 |
| Total assets turnover ratio | 4.78 | 2.76 | 4.22 | 1.68 | 4.35 | 3.56 |
Account Receivable Turnover is the first method that we used to assess the asset management ratios of the Stock Spirits Group. The Account receivable turnover method is used to measure the ability of a business to extend credit and collect debts on the same loan. The Accounts Payable turnover is calculated by dividing the total supplier Purchase with the average accounts payable. For the five previous years, the Stock Spirits Group had an average of 2.41 Account receivable turnover. The second method for assessing the asset management ratios is the inventory turnover ratio. The inventory turnover ratio is used in determining how best a company generates sales from the available inventory. The inventory turnover ratio is measured by dividing the cost of goods sold with the average list. For the past five years, the Stock Spirits Group had an average turnover ratio of 5.06., and this is a higher ratio that indicates that the company has strong sales. The other method used to assess the asset management ratios is the debtor’s turnover. The debtor’s turnover is also called the receivable turnover ratio, and it is used to determine the ability of the firm to manage and collect credits issued to customers. The debtor’s turnover ratio is calculated by dividing the net credit sales with the average receivable. In the last five years, the Stock Spirits group had a debtor’s turnover ratio of 3.25, and this indicates that the company has a sound credit management system.
Chapter Three: Financial Management Policies
This chapter will be looking into the financial management policies of the Stock Spirits group. The section will help us identify and clarify the roles and authorities of the financial management of the Stock Spirits Group in its activities and decisions. The article will also look into the dividend policies and the capital structure of the company.
Investment Analysis and Dividend Policy
Investment Analysis
This section will be expounding the Stock Spirits Group investment analysis. The investment analysis will help us advise any investor how his or her investment is likely to perform in the Stock Spirits Group. In conducting the investment analysis, we will be assessing the earnings per shSharedividend per shSharebasic earnings per shShareamong other methods.
Table 4: Investment ratios
| Stock Spirits Group Investment Ratios | ||||||
| 2015 | 2016 | 2017 | 2018 | 2019 | Average | |
| Earnings Per ShSharediluted) | 0.07 | 0.11 | 0.05 | 0.11 | 0.13 | 0.09 |
| Dividends Per Share | 0.05 | 0.07 | 0.07 | 0.07 | 0.08 | 0.10 |
| Basic earnings per share | .07 | 0.11 | 0.05 | 0.11 | 0.13 | 0.09 |
| Equity ratio | 53.69% | 52.26% | 51.89% | 56.05% | 53.69% | 53.54% |
| Dividend Yield | 3.23% | 3.62% | 2.69% | 3.80% | 3.29% | 3.33% |
| Price Earnings Ratio | 19.21% | 15.74% | 51.09% | 17.21% | 18.48% | 24.35% |
| Sales per | Share .94 | 1.07 | 1.20 | 1.15 | 1.38 | 1.15 |
The first method to use in the investment analysis is the earnings per shShareThe earnings per share calculated by dividing the current net profit with the number of shares. The EPS helps typically, and the investors determine the amount of money each shShareenerates within a specific period. From the above table, the stock Spirits group had average diluted earnings per share 0.09, meaning that each shareholder would get a 0.09 of the total net income of the Stock Spirits Group. The second method that we used in the investment analysis of the Stock Spirits Group is the dividends. The Dividend per shares the total number of declared dividends that a company has issued on every ordinary shShareThe dividends per shares the most basic method that any investor can use to calculate the amount of profits arising from his or her shares. The Dividend per shSharean is calculated by dividing the difference of the sum of dividends over a period and particular, one time dividends over a period, with the ordinary shares outstanding for the period. For the past five years, the Stock spirits Group had an average DPS of 0.10, meaning that for every shSharen investor has on the Stock Spirits Group business, he or she receives a 0.09 share of the net income.
The third method is the basic earnings per share which are usually reported in a company’s income statement. BEPS frequently explains how much income is allocated to each stock. The basic earnings per share calculated by finding the difference of the net income and preferred Dividend and then dividing the results with the weighted average of common share For the past five years the Stock Spirits Group had an average basic earning per share 0.09. This average BEPS shows that the Stock Spirits Group financial health can generate profit to its investors. The other method used in the investment analysis of the Stock Spirits Group is the equity ratio. The equity ratio is useful to debtors since it helps them know how well a particular company can manage its debts. The equity ratio is calculated by dividing the total EquityEquity with the total assets. Over the past five years, the Stock Spirits Group had an average equity ratio of 53.54%. This high average equity ratio indicates that the Stock Spirits Group was able to fund for its assets requirements with a slight help of the debt. If the equity ratio of the stock spirits Group is low in any particular year, it would indicate that the company used more debt to fund for its assets requirements. The dividend yield is another method we used in the investment analysis of the Stock Spirits Group. The dividend yield is the total amount of money that is paid to the shareholders for their shares. The dividend yield is calculated by dividing the annual dividends per shShareith price per share. From the above table, and the Stock Spirits group had an average dividend yield of 3.33%. It is quite clear that the dividend yield in the company is stable and any investor who had invested in the Stock Spirits company received a 3.33% dividend on each shSharehat he or she had.
Chapter Four: Valuation of the Stock Spirits Group
This chapter will be discussing the valuation of the Stock Spirits Group to enable us to know its economic value. Through the company’s valuation, we will also be able to identify the sales value and the taxation of the company. The estimate is essential to the government since the government uses it in the tax reporting process.
Forecasted Income Statement of the Stock Spirits Group
The Forecasted income statement is used to forecast the profit and loss of a particular company. The forecasted income statement usually acts as a guide to the business for the oncoming accounting periods. Below is a table showing the forecasted income statement of the Stock Spirits Group for five years.
Table 5: Forecasted Income Statement
| For the YearYear ended | 2019 | 2020 | 2021 | 2022 | 2023 |
| £ ‘m’ | £ ‘m’ | £ ‘m’ | £ ‘m’ | £ ‘m’ | |
| Revenue | 384.2 | 395.1 | 413.2 | 427.1 | 450.2 |
| Cost of sales | 312 | 326 | 334 | 351 | 363 |
| Gross profit | 2,243.30 | 1,992.80 | 2,311.65 | 2,727.74 | 3,109.63 |
| Net operating expenses | 173 | 162 | 156 | 152 | 150 |
|
| |||||
| Net income | 44.15 | 47.75 | 50.53 | 53.98 | 49.18 |
| EBITDA | 76.61 | 79.08 | 82.42 | 84.54 | 93.63 |
| Profit before tax | 382 | 444 | 484 | 560 | 660 |
| Net profit | 283 | 254 | 267 | 289 | 293 |
Chapter Five: Conclusion
Basing from the high financial performance of the Stock Spirits Group, one can conclude that the company is performing so well in the Eastern and Central market. The having been established in 2008, it has become a significant competitor to company’s that were created a long time ago. Since the 2013 year (when the company started receiving public offerings), it is evident that Stock Spirits Group share has continuously been increasing. Given the economic environment in Eastern and Central Europe, the Stock Spirits company has the capability of doing well. The company should make use of the available technology in all it’s an operation so that it can effectively be able to compete with other large firms.