Rationalization of Stock Price through Financial Analysis
Objective: The main objective of the report is to identify the discrepancy between the Market Value and the Book Value of the share and rationalize why this discrepancy exists through:
§ Making a thorough analysis of the company’s financial statements over the last 5 years through ratio analysis, cash flow analysis and analysis of major components of the balance sheet and trying to identify which components of the balance sheet is not reflective of its market price leading to the discrepancy between book value per share and market value per share.
§ Ideally, our selected company should have been compared with industry average in order to assess its relative performance. The industry in our case should comprise of all the ceramic industries listed in the DSE and CSE. Currently, there are 80 pharmaceutical industries listed in the DSE and CSE. The industry average should consider all 80 companies to arrive at the industry ratio. However, due to time constraint, it was not possible for us to collect financial figures of all 80 companies and calculate industry average as such. Therefore, we went for Beximco Pharmaceuticals Limited, which is one of the rival firms for Square Pharmaceuticals Limited.
§ Evaluating the financial condition between Square Pharmaceuticals Limited and Beximco Pharmaceuticals Limited on the basis of Annual Reports for the year 2003-2004, 2004-05, 2005-2006, 2006-2007 and 2007-2008.
To investigate the financial strength and level of competency.
Objective: The main objective of the report is to identify the discrepancy between the Market Value and the Book Value of the share and rationalize why this discrepancy exists through:
§ Making a thorough analysis of the company’s financial statements over the last 5 years through ratio analysis, cash flow analysis and analysis of major components of the balance sheet and trying to identify which components of the balance sheet is not reflective of its market price leading to the discrepancy between book value per share and market value per share.
§ Ideally, our selected company should have been compared with industry average in order to assess its relative performance. The industry in our case should comprise of all the ceramic industries listed in the DSE and CSE. Currently, there are 80 pharmaceutical industries listed in the DSE and CSE. The industry average should consider all 80 companies to arrive at the industry ratio. However, due to time constraint, it was not possible for us to collect financial figures of all 80 companies and calculate industry average as such. Therefore, we went for Beximco Pharmaceuticals Limited, which is one of the rival firms for Square Pharmaceuticals Limited.
§ Evaluating the financial condition between Square Pharmaceuticals Limited and Beximco Pharmaceuticals Limited on the basis of Annual Reports for the year 2003-2004, 2004-05, 2005-2006, 2006-2007 and 2007-2008.
To investigate the financial strength and level of competency.