Top Four Picks from FTSE and ASE - A Financial Ratio Perspective
OPAP (ASE: OPAr.AT) METKA (ASE: MTKr.AT) ARM HOLDINGS (FTSE: ARM.L) and MULBERRY (FTSE: MUL.L) were four companies that showed great financial perspectives. Management efficiency, good financial strength and profitability ratios were some of the main criteria used.
As far as the liquidity ratios are concerned, OPAP has a current and quick ratio of 1.06, respectively. According to the rule of thumb, when the quick ratio is over one (1), then the company can meet all its liabilities if it has to pay them immediately. Although liquidity ratios are satisfactory, what really underlines the strength of the comapny in relation to the industry is the total liabilities.
The LT Debt / Equity ratio is 11.05, whereas the whole industry has a ratio of 36.13. Moreover, the Total Debt / Equity ratio is 20.59, whereas the industry has 40.46. Both ratios underlined how "leveraged" the company is, which enables it to have a lower debt exposure.
Although, low debt exposure and leverage may indicate the company's ability to exploit debt for growth, profitability and managament ratios underline how sufficient and profitable the operations are.
For example, the gross margin and the net profit margin of the company are 14.85 and 8.60 respectively. As far as the return on equity and the return on asset are concerned, the ROA is 18.32, whereas the industry has 14.06. Moreover, the ROE appears to be 32.02, while in the industry it is 30.44.
As far as the liquidity ratios are concerned, METKA appears to have both strong quick and current ratio. The current ratio is 2.28, whereas in the industry it is 1.07. The industry has a quick ratio of 0.80, while METKA has a ratio of 2.19. Although according to the rule of thumb, a liquidity ratio over two (2) is considered to generate opportunity cost and not manage the operations efficiently, the management of the assets are proof for the opposite.
The return on assets is 9.64, while in the industry it is 2.90. As far as the return on equity is concerned METKA has a ROE of 21.63 and the industry has a ratio of 5.86.
The profitability ratios highlight that the company can generate profit efficiently and better than the rest of the industry. The gross margin of the company is 19.20 (14.62-industry) and the net profit margin is 14.24 (10.19-industry).
Last but not least, the low leverage and the gearing ratio of the company in relation to the whole industry underlines that exposure to any non-viable debt liabilities-obligations is very limited. The LT Debt/Equity ratio is 0.71, whereas the industry has a ratio of 21.73. The Total Debt/Equity is 13.38 (36.69-industry).
The profitability ratios of ARM HOLDINGS are the strongest in the industry. The company has a gross margin ratio of 94.25, whereas the industry has a ratio of 27.15. Furthermore, the net profit margin is 22.48 (-0.64 -industry).
As far as the financial strength of the company is concerned, ARM HOLDINGS has the strongest leverage-gearing ratio in the industry as well as the most available cash for the everyday operations if needed. More specifically, the quick ratio is 2.98 (2.50-industry) and the current ratio is 2.99 (3.22-industry). The LT Debt/Equity is 0.17, whereas the industry has an LT Debt/Equity 49.19. Lastly, the Total Debt/Equity is 0.39 (69.11-industry).
According to the rule of thumb, liquidity ratios over two (2) underline that the company suffers from opportunity cost however, the management efficiency shows that the company can exploit all its assets and equity effectively. The ROA is 9.92 (0.31-industry) and the ROE is 12.03 (-7.68 -industry).
The company has a gross margin ratio of 63.29 (39.35-industry) and a net profit margin ratio of 11.32, whereas in the industry 5.46.
The quick ratio and the current ratio are 1.10 and 2.19 respectively. What is really of paramount importance regarding the financial strength is the debt-liabilities of the company in relation to its equity. Both LT Debt/Equity and Total Debt/Equity are 0.00 and 0.00 respectively, whereas the industry has 9.75 and 27.23.
The ROA is 17.40, whereas it is 4.25 in industry. The ROE is 26.48 (6.80-industry). Both the returns signify that the management of the assets and the equity of the company in relation to its operations, are effectively done.
Ratio figures adopted by: Reuters
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