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content
preface ......................................................................................2
Chapter 1 : introduction of footwear
industry and reebok international ltd ..............3
Characteristics of the footwear industry ............... 3
1. Overview ........................................................................................... 3
2. Characteristics of footwear industry and its products ....................... 3
3. Customers .......................................................................................... 4
4. Suppliers ............................................................................................ 4
5. Competitors ....................................................................................... 4
II. introduction of Reebok ......................................................... 6
1. History of the company ..................................................................... 6
2. Brandnames ....................................................................................... 6
III.
Strategies ................................................................................... 7
IV.
SWOT analysis........................................................................... 8
1. Strengths ............................................................................................ 8
2. Weaknesses ....................................................................................... 8
3. Opportunities ..................................................................................... 9
4. Threats ............................................................................................... 9
I.
Chapter 2 : Finance reports and stock
analysis ......................................................................................10
Finance reports ......................................................................... 10
1. Balance sheet ................................................................................... 10
2. Income statement ............................................................................ 12
3. Cashflow statement ......................................................................... 13
II. Stock analysis of 3 latest years ................................... 13
1. Stock price of Reebok ..................................................................... 13
2. Earnings per share(EPS) .................................................................. 14
I.
Chapter 3 : consultancy ............................................. ...18
2
Financial analysis of Reebok
preface
Human have so many wants and needs and they always try to find some
ways to satisfy themselves. As a rule, Investors never keep money in their
hand but not invest them in market. It is the reason why so many people are
interested in analysing financial data, stock price of some company in order to
decide whether they should risk their money or not.
Before the year 2000, people seemed to be attracted in some high
technology industry to invest due to its high growth rate. But after the collapse
of some Bigs such as World.com, people tend into investing in some
traditional industry or safety industry more and more.
In order to understand profoundly the subject ‚ Finance accounting‛,
we - the group 4th of A2 FBA K38 - have chance to research on Reebok
company under the guide of Professor Master Nguyen Thuc Anh. As
requested, we have analysed some data and index of the company’s financial
state and stock price in order to give some advice for investors who interest in
buying RBK stocks. In fact, after one and a haft month devoting our all efforts
to study Reebok company in particular and other companies in general, we
have gained so many useful things and experience. However, it is our first
time to do that kind of reseach and due to our unexperienced knowledge we
may not avoid making some mistakes. Therefore we highly appreciate to
receive the comment from all of you, especially from out professor Master
Nguyen Thuc Anh.
Thank you for paying time to us.
Hanoi, 12/2002
Group 4th - A2 QTKD K38
Group 4th - A2.FBA.K38
Financial analysis of Reebok
3
Chapter 1 : introduction of footwear industry
and reebok international ltd
I.
Characteristics of the footwear industry
1. Overview
Sales picture of footwear industry over the past couple of years has been
gloomy as a result of a glut of shoes store, gross oversupply and a general
trend toward ‚ brown leather shoes‛. These are the primary culprits causing
the loss or none-profit overall the industry. However, business finally seems to
be improving now and in some coming years, promising a great potential for
companies in the industry.
This k ind of the industry is very sensible to variations of the market and
it is also a seasonal business. So it requires all producers to be able to quickly
react to new market demand, develop product range. Furthermore, the
characteristic of the shoe-business can be indentified with entertainment
industry, where the product have short-life cycles and success depends on
what is flashy and stylish.
Today’s athletic shoes market is a mixture between fashion and
technology. So if a commpany wants to make a competitive distintion, it
should have create a fashionable image for itself.
2. Characteristics of footwear industry and its products
This industry is controlled by the large five: Nike (with market capture
of 11,4 B $ up to Oct of the year 2002), Reebok ( with market capture of 1,5 B
$), Converse, LA Gear,Striderite so this is a concentrated industry since the
‚big five‛ sets the trends. The athletic shoe wear industry is also an unique
one in the way it is market driven instead of product driven. That means every
reaction of the customers is noted by the producers and they will supply
customers with satisfactory products.
In this industry producers are likely to diversify their range of products
easily since customers’ needs seem to be related to each others. Men's apparel
and accessories marketed can push others needs of customers of products
ranging from golf apparel, leather jackets and sweaters to activewear and
swimwear.
The threat of substitude products is low since this industry is a mixture
between fashion and technology and only producers who have created the
fame and fashionable image can sell goods. Futhermore, the industry is
upgrading the products frequently to cope with flashy fads and the hottest
fashion so there are not too many close substitude products to athletics shoes.
However, some multipurpose shoes such as ‚ cross trainers‛ may be a possible
substitude threat to the current highly diversified range of athletic shoes on the
market.
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Financial analysis of Reebok
4
3. Customers
It is obvious that in the footwear industry there are many kinds of
customers who have different tastes and income. Therefore, all producers need
to supply a wide range of products in order to suit with every demand of the
customers.
Targeted customers of companies in this industry are women who use
walking shoes and also males between the ages of 16 and 25, and a children's
line targeted to boys and girls between the ages of 5 and 12.
Besides those customers companies which operate in the footwear
industry are designed to meet the demands of specific consumer types: image
and fashion conscious athletes, sports and fitness enthusiasts, and casual
athletic shoe buyers. Students have also been a key purchasing group because
they are at the age forming their opinions about things. In general, a
significant portion of the spending will be done by people age 18 to 37.
As a whole, footwear industry is a field which can serves all kinds of
people. It makes the producers have a full range of customers and must have
their own division of market segment. The potential customers of this industry
are people between the age of 5-37 including children, women, men and
professional athletes with many different tastes. However, the bargainning
power of the customers is medium to low.It is because the purchase of the
customers is not concenrated in large volumes and products have difference
thanks to the difference among different brand name.
4. Suppliers
In this kind of industry, producers need many sources to produce their
products, including material, machines, technique and services such as online
marketing service, permisson-based mail marketing service....This input is
dominated by relative few companies. Therefore, the bargaining power of
suppliers is medium to high since the product is unique and the switching
costs are high. Futhermore, it is possible for producers (especially in foreign
manufacturing) to intergrate forwards into the industry’ s business (in
overseas market ) and become an opponent to companies in the footwear
industry.
5. Competitors
Competition in this industry is quite strong, mainly among the ‚large
five‛ Nike, Reebok, Converse, LA Gear,Striderite and also among some
branches like Polo, Timberland, Adidas ...Each company has its own strategy
and customers but there is always a dispute among them. However, now, the
most serious threat of competition is NAFTA (North America free trade area).
This area allows all competitors compete equally and freely and it leads
companies to reduce their labor and manufacturing costs to maintain
company’s profitabilitty.
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Financial analysis of Reebok
5
Competitors in the footwear field include a number of sports and fitness
footwear and apparel companies, such as Nike, Adidas, Fila, New Balance and
Skechers. Apparel competitors include numerous brands such as Nike,
Adidas, Rocawear, Ecko, Brand Jordan, FUBU, Mecca and ENYCE.
Competition among men's casual sportswear, golf apparel and footwear
makers includes Timberland, Clarks, Ecco, Mephisto, Bass, Bostonian,
Merrell, Easy Spirit, Nine West and Gabor Cole Haan, Tommy Hilfiger, Prada
and Gucci.
Reebok and Nike are the principal players in the industry. Although
Nike has also experienced some rough times, revenue fell 8% in fiscal
1999...but it has now moved back into a position where its gross margins are
stronger than its competitors. Nike’s products also includes athletic footwear,
apparel, swimsuit, leather goods and it is estimated that Nike capture 45%
market share in the industry while Reebok ‘s part is 15%-18% of the pie only.
All in all, Nike has more power to the market than others because they have
righter strategy, faster long-term growth, stronger industry position, greater
international exposure and better brand name management.
Besides Nike, there are many current competitors which can be threat of
any producer in this industry. We can mention to Timberland or Polo as
examples.The Timberland Company headquartered in Stratham, New
Hampshire, designs, engineers, markets and distributes premium quality
footwear, apparel and accessories for men, women and children. Timberland®
products are sold in the United States and internationally through independent
retailers, better-grade department stores and athletic stores, in addition to the
Company’s own retail locations.The most important product of Timberland is
Timberland Footwear. Timberland has enjoyed significant expansion of its
brand presence both domestically and abroad Timberland’s markets include
Europe, United States, Asia and Asia- Pacific regions. Total market capture of
Timberland up to Oct,2002 is 1.1B $.
Polo Ralph Lauren Corp is a leader in the design marketing and
distribution of premium lilfestyle product in 4 categories : apparel(which
includes extensive collections for men’s, women’s, childen’s clothing), home
(which offers coordinated products for the home, interior decor..), accessories
( which includes a broad range of products such as eyewear, jewelry, leather
goods..) and frangrance(which includes skincare products). It constitutes one
of the world’s most widely recognised families of consumer brands. Its main
markets are United States, Europe and Asia. In fiscal 2002, the company
estimates to have 1,1 B$ of wholesale which includes 6,3% wholesale net
sales comes from chirlren wear; 41,8% comes from menswear; 8,6% comes
from home; 8,7% come from fragrances; 9,4% comes from accessaries and
25,4% comes from womenswear.
As we said above this kind of market is dominated by ‚the big five‛ so
it is difficult to penetrate the market and cope directly with these Bigs (Not to
mention the high capital requirements due to advertising, research and
Group 4th - A2.FBA.K38
Financial analysis of Reebok
6
development). Furthermore, the relationship between dealers and distributers
is tied up by internal relationship between distributors and producers. So it is
really a challengence to anybody who wants to join this field. In conclusion,
the threat of new entrants into the industry is low so in this industry there are
not many potential competitors.
II.
introduction of Reebok
1. History of the company
In the 1890s, Joseph William Foster - a famous English runner - made
some of the first running shoes with spike in them and then Reebok’s United
Kingdom-based ancestor company was founded. By 1895, Foster was in
business making shoe by hand for top runners and with his sons, they
developed an international clientele of distinguished athletic.
In 1979, Paul Fireman, a partner in an outdoor sporting goods
distributorship, spotted Reebok shoes at an international trade show. He
negotiated for the North America distribution license and then introduced
three running shoes in the US market as foundation of Reebok USA, Ltd. At
that period, its original strategy was aimed at prestige and at high price. At
$60, they were the most expensive running shoes in the market.
In 1981, PLC a British wholesaler of footwear acquired 56%of the
common stock in exchange for $77.500 in cash. Fireman and PLC agreed that
neither party would sell its stock to third party.
In 1985, Reebok USA purchase Reebok Britain to form a single
company up to now. Since then, Reebok had many explosive steps to become
a multinational firm. Its structure includes 4 groups: Reebok international,
USA; Rockport company; Ralph Lauren Footwear and Greg Norman
Collection. Products of Reebok are now available in over 140 countries
including 3 main markets North America, Europe and Asia among them
European market is the largest one with many subsidiaries ranging from Italy,
Austria, German to Russia.
2. Brandnames
Reebok is now a global company engaged in the design and market of
sport and fitness products, including footwear, apparel and accessories as well
as the design and marketing of footwear and apparel for non-athletic, ‚casual‛
use.
* The Reebok brand
The Reebok brand designs, produces and markets sports, fitness and
casual footwear, appareel and accessories that combine characteristiics of
sport and style. Products of company also include footwear and apparel for
children sold under the Reebok and Weebok brands. Nowadays, The way
reebok chooses to expand is implementing strategic licensing program in
which its technologies and/or trademark are licensed to third paties.
Group 4th - A2.FBA.K38
Financial analysis of Reebok
7
*Rockport company.
Rockport focuses on specially engineered comfort footwear for both
men and women. Its product line includes performance, casual and dress
shoes. In 2001, Rockport concentrated on strengthening its men’product by
introduction of some new collections. Besides, it continues to use proprietary
technology to enhance women’s walking product and siged a license
agreement for the development of children’s footwear.
*The Greg Norman Collection.
Originally a golf product line, the Greg Norman Collection has grown
its line of men’s sportswear to include products ranging from leather jackets
and sweaters to activewear and swimwear. In addition, it offers belts, small
leather goods and hosiery product. In 2001, the Greg Norman Collection
introduced men’s golf apparel marketed under Reebok name, continuing to
offer a line of moisture management golf shirts under the trademark
PLAYDRY.
*The Ralph Lauren Footwear Co., Inc.
Its product line features traditional classic with Polo Sport and Polo
Jeans brand names which is targeted to males between the ages of 16 and 25,
and to children between the ages of 5 and 12. The Ralph Lauren also offers
dress and casual silhouettes. Internationally, it has distributors in Japan,
Canada, Central America and Europe and its products are sold through top-tier
retailers.
III.
Strategies
Fireman has applied some right strategies that led to the amazing
performance of Reebok
First one Fireman chose to apply is a concentrated growth strategy.
At the beginning of the company, it used all resources to penetrate into fixed
market. By utilizing excellent marketing techniques and effective promotion
program, fireman introduced only 3 styles of running shoe in only U.S market.
Following this strategy, fireman started to apply a product
development strategy. At that moment, company had built up its reputation
so it only focused on some product line such as women’s aerobic shoe and
tennis shoe – its traditional strong point and deliver them on so many market
in order to pro-long product life cycle and attract satisfied customer to new
products. For example, when there was a sign of reduction in sales in U.S
market, the same product would be launched in South East Asia.
The third strategy is market development one. With large
diversification, fireman now concentrated growth on national and international
expansion. Also, he started to attract other market segments.
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Financial analysis of Reebok
8
Finally, Fireman focused on horizontal integration. He set up
acquisition of similar firms operating in the same market. This could eliminate
potential competitors, provide access to new market, greatly expand
operations as well as improve company’s diversification of its product line.
For instant, in 1986, Rockport company – a manufacturer of high
performance walking shoe was required or in 1987, Reebok purchased AVIA
Group International – an Oregon based athletic shoe ... This one greatly
attributed to Reebok’s success. Reebok was able to require distribution
channel, technical knowledge, enhance profits and finally create a favorable
brand image of existing goods. Besides, it launches many campaigns on
advertising by having agreement with music and sport stars, with National
Football League (NFL) and The National Basketball Association to remain its
market share in comparison with Nike.
IV.
SWOT analysis
1. Strengths
The internal strengs of Reebok are all of the following:
Firstly, company has an extremely strong financial position. Its growth
has been phenomenal. It has the highest growth rate from 1983 – 1987 and
since that sales has continued to increase, from $ 12.8 m in 1983 to more than
$ 1.8 b in 1989 and certainly, earning per share has increased. Furthermore,
Reebok has a high level of liquidity and operated with minimal long-term
debt, so it has financial resources available to invest into market niches.
Secondly, thanks to successful strategic acquisition of reputation
companies, it is able to market a wide array of show–wear and is more
diversified than any competitors. For example, Rockport is the most dominant
brand in the walking shoe and a clear market leader in the tennis shoe market.
In addition, with the longest history, the latest technology and prestige,
Reebok is considered good and fashionable brand.
Finally, Reebok’s top management is highly marketing oriented. This is
strength for company, especially this industry is market driven instead of
product driven.
2. Weaknesses
The weaknesses of Reebok include all of the following:
In the new reorganization, AVIA is no longer represented in group of
four operating company. It was allowed to pursue its own strategies including
aggressive competition with Reebok brand. This could cause internal tension
within cooperation.
On the other hand, due to managing style there is a conflict of interest
in the top management between Fireman party and someone. It leaded to the
resignation of Joseph Labonte - the former president and operating officer
and Mark Goldston – the former chief marketing officer who had managerial
Group 4th - A2.FBA.K38
Financial analysis of Reebok
9
experience in multibillion – dollar organization and in heavy marketing as
well as in advertising of consumer brand name. As a result, Fireman took the
position of chairman, president, and COF. That is an impossible task. The
company is highly dependent on one single person who will not be able to
effective handle all of the required.
Moreover, Reebok’s main product-line weakness is in its apparel
division.
3. Opportunities
The opportunities of Reebok are the following:
It may continue market diversification and expansion into inter-market
in order to meet the potential customer’s demand. Besides, it can pro-long the
product life cycle by marketing the different products in different nations.
Moreover, it is Reebok’ weakness of apparel division that opens opportunity.
Reebok should focus on merging or purchasing well-know apparel
manufacturer as horizontal acquisition it has been doing.
4. Threats
Although this is concentrated industry but the harsh competition from
main competitors, especially Nike is significant. To remain the market share
and penetrate the new market cost a lot of money ad put much pressure on
marketing, research or development. Also, the short product life cycles play
an important role in the return or investment in a particular product line.
Furthermore, weakening markets may be a serious threat to Reebok. Are
people willing to buy a pair of jogging at price of hundreds of dollars. In a
weakening economy that is highly questionable.
The most serious threat for Reebok is from NAFTA. High tariff and
other non tariff regulations may be imposed on the company foreign
manufactured goods while most of Reebok’s product is manufactured in South
East Asia. Also, manufacturing and labor costs will increase in South East
Asia and Reebok will confront higher costs of goods sold accounts which will
directly impact on the net income.
Group 4th - A2.FBA.K38
10
Financial analysis of Reebok
Chapter 2 : Finance reports and stock analysis
I.
Finance reports
1. Balance sheet
In millions of USD
Annual Balance Sheet
2001
2000
1999
1,294.7
413.3
383.4
362.9
30.8
104.3
248.5
134.0
349.5
(215.5)
76.7
1,225.2
268.7
423.8
393.6
37.4
101.7
237.8
141.8
356.0
(214.1)
64.3
1,243.1
281.7
417.4
414.6
41.2
88.1
321
178.1
421.7
(243.6)
68.9
37.8
31.7
74.0
1,543.2
1,463.0
1,564.1
823.2
449.4
127.3
269.7
11.8
0.1
40.5
351.2
22.6
719.9
1.0
(660.4)
1,453.3
(74.0)
855.2
488.1
172.0
272.1
8.9
13.8
21.3
345.0
22.0
607.9
1.0
(653.4)
1,301.3
(41.0)
1,035.3
616.4
154.0
241.3
27.6
185.2
8.3
370.3
48.6
528.8
0.9
(617.6)
1,170.9
(25.4)
1,543.1
1,463.1
1,564.1
assets
Total current assets
Cash and short term Inv
Total receivable
Total inventory
Prepaid Expenses
Other current assets
Total long term assets
Tangible Fixed assets(PPE)
Total cost
Accum. Depre.
Intangible fixed assets & Goodwill
Other long term assets & Long
term Investment
Total assets
liabilities and equity
Total Liabilities(1)=(2)+(3)+(4)+(5)+(6)
Total Current Liability(2)
Accounts Payable
Accrued Expenses
Notes Payable/Short Term Debt(3)
Cur. Port. LT Debt/Capital Lease(4)
Other Current liabilities, Total
Long Term Debt(5)
Minority Interest(6)
Total Equity(7)
Comon Stock
Treasury Stock Comon ($ Amount)
Retained Earnings/Accum. Deficit
Other Equity, Total
Total Liability & Shareholder's
Equity=(1)+(7)
Group 4th - A2.FBA.K38
11
Financial analysis of Reebok
Company
2001
2000
1999
Total current assets to
Total assets
83.90
83.46
79.50
Total fixed assets to
Total assets
16.10
16.54
20.50
Total Liability to
Total Liability &
Shareholder's Equity
53.34
58.45
66.20
Total Equity to
Total Liability &
Shareholder's Equity
46.66
41.55
33.80
Income after Tax to
Total Revenue
3.59
3.03
0.62
Income after Tax to
Total Assets
6.97
5.93
1.14
Index (%)
ROE
ROA
ROI
Current ratio
Quick ratio
Days receivable
outstanding
Days Inventory
Outstanding
Nike
17.03
9.37
11.43
1.9
0.99
63.14
Reebok
14.28
5.67
9.19
2.51
1.42
62.07
91.47
80.57
Remark
These ratios tell us how well Reebok is doing relative to its biggest
competitor Nike. The ROE and ROA numbers of Nike are larger than Reebok
because the intangible assets of Nike are not recognized on its balance sheet
and therefore are not recorded in th total Assets. As a result those members
are overstarting the true value of Nike’s ROE and ROA.
The days receivable number of approximately 62 days tell us that
Reebok is taking about 2 months to collect payments from its customers.
Group 4th - A2.FBA.K38
12
Financial analysis of Reebok
Compared to Nike, Reebok is okay but it should try to decrease this number in
the future.
In terms of inventory, Reebok takes about 80 days to sell its inventory
while Nike takes 91 days.
However, Reebok is getting lower return on its investment than Nike.
Both current Ratio and Quick Ratio are higher than Nike’s ones which
indicate high liquidity.
Financial Strength
Company
Quick Ratio
1.69
Current Ratio
2.71
Total Debt to Equity 0.46
Industry
1.61
2.83
0.25
S&P 500
1.10
1.64
0.97
2. Income statement
Annual income statement
In millions of USD
2001
2000
Revenue(1)
Total Revenue
Cost of revenue(2)
Gross profit(3)=(1)- (2)
Selling/General/Adm Expenses
Other operating Expenses
(R&D;Depre/Amortization)
Income Before Tax
Income Tax- Total
Income After Tax
Minority Interest
Net Income
Group 4th - A2.FBA.K38
1999
2,992.9
2,992.9
1,894.5
1,098.4
913.9
2,865.2
2,865.2
1,779.7
1,085.6
915.4
2,899.9
2,899.9
1,783.9
1,116.0
971.9
28.6
34.3
115.9
155.8
48.3
107.5
(4.8)
102.7
135.8
49.0
86.8
(5.9)
80.9
28.0
10.1
17.9
(6.9)
11.0
13
Financial analysis of Reebok
3. Cashflow statement
Annual cashflow statement (Indirect method)
In millions of USD
2001
2000
Total Operating Activities
Net Income
Depreciation/Depletion
Changes income Working Capital
Deferred Taxes
Non-cash Iterms
Total Investing Activities
Capital Expenditures
Other Investing Cash Flow Iterms
Total Financing Activity
Isuance/Retirement of Stock
Isuance/Retirement of Debt
Foreign Exchange Effects
Net Change in Cash
II.
176.2
102.7
36.6
42.5
(0.5)
(5.0)
(27.3)
(27.4)
0.1
(0.6)
17.8
(18.4)
(3.7)
144.6
183.1
80.9
46.2
33.4
12.2
10.5
10.8
(29.2)
40.0
(202.8)
10.7
(213.4)
(4.2)
(13.1)
1999
263.7
11.0
48.6
162.8
(9.4)
50.6
(51.2)
(51.2)
(120.9)
(13.6)
(107.3)
10.1
101.7
Stock analysis of 3 latest years
1. Stock price of Reebok
Performing of RBK
Stock: Reebok International
Industry: Shoes
Index:
S&P 500
Look at the chart above, we can see the fluctuation of the three: the
price of RBK, the Standard and Poor 500 Index and the price index of shoes
Group 4th - A2.FBA.K38
Financial analysis of Reebok
14
industry. (Standard & Poor's 500 index (S&P 500): A well-known, value-rated
index of 500 major US companies: 400 industrial firms, 20 transportation
firms, 40 utilities firms, and 40 financial firms)
- As we can see in the chart above, at the end of 1999 and the beginning
of 2000, RBK’s price sharply decreased since the deflation of USA
economy. Fiscal year 2000 was a disastrous one for the stocks and the
stock market. However one company did not feel the ill effects of the
downturn, in fact profited. Reebok International experienced a 270.96%
increase in its stock price between January 31, 2000 and December 31,
2000. The stock price went from $7.37 in January to $27.34 in
December.
- In 2001 and 2002, due to creative marketing campaign, and other
appropriate strategy, net income of the company increased continuously
and affected positively the price of stock. (We have mentioned in other
parts). In 2001, price of RBK only increased 20 cents per share as
investors undervalued it and the market for shoes are shrinking. But we
see the brighter future of RBK in 2002, the price of RBK at this
moment, are increasing as net income soared.
2. Earnings per share(EPS)
This chart shows earnings per share index through ten year. This chart
explains the first chart. (Earnings per share: Earnings found by dividing the
net income of the company by the number of shares of common outstanding
stock)
We can see the connection between net income and share price.
Increase in net income leads to the increase in share price. Then the increase
in net in come depends on the management of the board and the
favourableness of environment.
Group 4th - A2.FBA.K38
15
Financial analysis of Reebok
Earnings per share
Unit : USD
Quaters
Mar
Jun
Sep
Dec
1999
0.320
0.080
0.060
-0.260
2000
0.560
0.190
0.560
0.106
2001
0.640
0.235
0.660
0.090
2002
0.578
0.390
0.810
Totals
0.200
1.416
1.625
1.778
According to analysts EPS should reach in this quarter, in next quarter,
in this year and next year as the table below:
Consensus Estimates
This Qtr.
(Dec 02)
Avg Estimate
0.24
numbers of Analysts
9
Low Estimate
0.22
High Estimate
0.27
Year Ago EPS
0.09
Earnings Estimates
Next Qtr.
(Mar 03)
0.64
1
0.64
0.64
0.58
This Year
(Dec 02)
1.99
11
1.95
2.03
1.66
Next Year
(Dec 03)
2.22
11
2.15
2.35
1.99
Look at the table we can predict that the price of RBK will rise.
Actually price of RBK is rising and it may continue to rise much more higher
in next year with the average estimate is $2.22 per share. However, the politic
and economic environment of the USA still has some factors, which may
worry us. A war against Iraq and an economic recession are threatening the
future of the company. So the price of RBK may not go up as high as we
estimate.
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16
Financial analysis of Reebok
3. Some remarkable information
Average of competitors
Current price
(USD)
Earning
(2002)
Forward P/E
Book
value
Nike(NKE)
40.47
2.49
16.25
12.43
Fila(FLH)
4.99
0.61
8.18
4.47
Vans(VANS)
21.69
1.23
17.633
8.68
K-Swiss(KSWS)
26.19
2.28
11.486
12.05
Saucony(SCNYA)
6.88
1.58
4.351
10.46
Average
11.58
Reebok(RBK)
23.70
1.92
12.344
10.48
Below is some share information:
Share information
Share
Market cap
outstanding
(mil)
(000’s)
RBK $1,684.10 59,720
Number
of Shares
Held
% held by
Institutional by Institutionas
instutions
Shareholders (000's)
647
51,450
86.1%
Price and Valuation
Current
Price
RBK
28.20
EPS
RBK
$1.66
Industry* N/A*
200-day
50-day Avg
Avg
Price
Price
19.05-30.25 .64
25.33
26.78
Price/Earnings PEG Ratio Price/Sales Price/Boks
1.0
.52
14.70
2.13
(12/2001) (12/2001)
21.7
NC
1.16
N/A*
52-week
Range
60-month
Beta
RBK does not pay dividends. So RBK is not a desirable stock to invest
in if we like to receive dividends. With the trend today, people will
increasingly pay attention to dividend. A good part of a stock's underlying
value is in the dividends.
RBK is trading at 2.14 times book value. If investors have already
recognized a stock's blue-chip quality, that can make a great stock a bad buy.
We look for a stock trading at less than 1.5 times book value, but this test can
sometimes be broken if the company has proven, superior, long-term growth
Group 4th - A2.FBA.K38
Financial analysis of Reebok
17
characteristics. Such companies are often priced at many times book value,
especially in a bull market.
1647 institutional investors own 86.1% of RBK’s shares outstanding. A
high number of institutional owners (80 or more) holding at least 50% of the
shares outstanding tells us that a stock is a blue-chip company.
RBK has 59.7 million shares outstanding. This shows that RBK has
sufficient liquidity.
Stock Price Prediction of RBK
Calculate Intrinsic Value
Initial Earnings: 120,300,000
Earnings growth rate: 13.29 % ( Analysts’avg 5 year)
Discount rate: 15%
Total shares outstanding: 59.720milion
Intrinsic value/shr ($)= 120,300,000*(1+13,29%)5(1+15%)/59.720=
$43.31
Current price (15/10/2002):$ 28.02
We can see that RBK is undervalued
In short term. Price of RBK is increasing. Because:
- Almost of analysts think that RBK is undervalued.
- RBK is a fairly blue-chip stock.
- The company has a bright performing in the 3rd quarter.
- The company has a good prospect: become exclusive supplier for
NBA ...for 10 years. The effects of advertisement campaign..
Group 4th - A2.FBA.K38
Financial analysis of Reebok
18
Chapter 3 : consultancy
What should you do when you intend to invest your money in a
company? Obviously, You will not only consider carefully its financial state
but also look through its development as a whole. Assuming that you want to
buy stocks from Reebok, let’s us give you some analysis to decide if you buy
or not.
Take a closer look at Reeboks performance over the years 1994-2000,
we will find that in the year 1994 Reebok was much more a powerhouse in the
industry than it is today. However, beetween years 1994-1999, Reebok has an
astonishing drop off in market presence. Fiscal year 2000 came and went like
a natural disaster for the stock market and company as a whole. It was due to a
slowing economy and the fact of over saturation of styles in the footwear
industry. A tightening market leads to pricing pressures between top
competitors and makes Reebok itseft come to more efficience, find more
contracts and license its brands for accessories such as sunglasses, wallets,
and watches. With such efforts the firm invesment risk actually improved over
the time. We know that there are still some deal risk but the firm has been
much improved from the investors point of view.
As we mention above, the financial state and stock price of the
company has performed extremely well in sales, management, and stock price
(in the year 2000, returns on invested equity increased 270%). Morever, some
vertical index of Reebok even is better than its main competitor Nike (such as
current ratio, quick ratio, days inventory outstanding).These ratios tell us how
well Reebok is doing relatively to its biggest competitor Nike. The ROE and
ROA numbers of Nike are larger than Reebok because the intangible assets of
Nike are not recognized on its balance sheet and therefore are not recorded in
the total Assets. Besides, both current Ratio and Quick Ratio of Reebok are
higher than Nike’s ones which indicate higher liquidity and in terms of
inventory, Reebok takes about 80 days to sell its inventory while Nike takes
91 days.. Therefore, Reebok seems to be a more safety company to invest than
others, including Nike.
In fact, the days receivable number of Reebok approximately 62 days
tell us that Reebok is taking about 2 months to collect payments from its
customers. Compared to Nike, Reebok is okay but it should try to decrease
this number. Reebok is also getting lower return on its investment than Nike.
So, in the future, to gain a more attractive position in the market Reebok
should improve these numbers toward decreasing days to collect payment,
increasing return by promoting sales, concentrating more on advertising
campaing, after sales services, and liquidity...etc.
In terms of stock price we will find that Price of RBK is increasing in
the future. Because:
Group 4th - A2.FBA.K38
Financial analysis of Reebok
19
Almost of analysts think that RBK is undervalued.
RBK is a fairly blue-chip stock.
The company has a bright performing in the 3rd quarter of the year 2002
The company has a good prospect: become exclusive supplier for NBA
...for 10 years since 2002. In February of this year, Clearly Canadian Beverage
announced it signed a deal with Reebok to distribute and sell a new beverage
that athletes will use during competition or simply for the health conscious
consumers. Reebok will gain a profit from this deal. Morever, also in
February, Reebok and Venator Group decided to reintroduce the ‚pump
technology‛, exclusively to be sold at Foot Locker at the price of $100 in
retail and available in all sizes. The uses of advertisement campaign of
Reebok such as online marketing service comes to take effect..ect.
For all the reasons we have already presented, we can say that
"Well done Reebok" .
We highly recommend you to buy Reebok stocks. You will not make
a wrong decision and sure to have a real bargain. So, What are you
waiting for but buying some RBK stocks in your own ?
Group 4th - A2.FBA.K38
20
Financial analysis of Reebok
Ministry of education and training
Ha noi foreign trade university
Business accounting
I. Financial analysis of
reebok international ltd
Instructor
Student
:
:
Class
:
Mrs. Nguyen thuc anh
ngo thi ngoc anh
nguyen hong hanh
tran viet hung
do thanh huong
nguyen thuy mai
ho xuan quang
tran thi que
duong xuan tuyen
A2-QTKD-K38
Ha Noi 12/2002
Group 4th - A2.FBA.K38