QUESTION

1. The three listed companies are Lenta Ltd., X5 Retail Group N.V., Tesco PLC.，they are in the retail sector.
   we analyze 5 years, 2013,2014,2015,2016,2017
   3. The financial report can be download from their website.
   4. In the first part, totally should be around 2200 words
   a. firstly use around 100 words to introduce each company, totally 300 words.
   b. Secondly, analyze the profitability. Make a table, first row is five years, first column is the name of three companies. Make three different tables, for Net income margin (Net income/revenue), return on equity and return on assets. After each table, please explain the trends and the results. In the end of this part, summary the profitability performance of each companies across 5 years and also compare the profitability performance among three companies. In addition, make sure you introduce the meaning of each metric and the meaning of the value.
   c. Thirdly, analyze liquidity ratios (short term) and solvency ratios (long term). For liquidity: please use the current ratio and quick ratio. For solvency, please use Solvency ratio and Debt-Equity ratio. Same as the profitabiliy, analyze it detailly.
   d. Fourthly, analyze from equity shareholder perspective, please use the earnings per share, Price Earning ratio. The analysis is the same as before
   e. Overall analyze the performance of three companies
   Part 2. Please use the p/E method to do the valuations of three companies and compare the price with the current price, and make your recommendation (purchase or sell), part 2 is around 600words

                                                                 SAMPLE SOLUTION

Tesco Plc. trading is a multinational groceries and other general merchandise retailer that is based inHertfordshire in England but operates throughout Asia and Europe. It is the world’s third largest retailer based on gross revenues. It was founded as a group of market stalls in 1919 and controls about 28% of the UK’s groceries and other general merchandise market. It is listed as TSCO in London Stock Exchange and also in Irish Stock Exchange. It is among the companies that form the FTSE 100 component. This report analyzes the performance of Tesco Plc. compared to its competitors in the market, Lenta limited and X5 retailing Group.

Profitability ratios such as Return on Capital Employed and Return on Assets have been used to compare the profitability of the three companies. Other ratios like solvency and liquidity ratios have also been applied to evaluate the financial soundness of the company in relation to its competitors in the market. The Price/Earnings ratio has been utilized to determine the value of the company. The major differences in financial performance of the companies that operate in the same industry can be attributed to the differences in dividend policies, profitability and the prevailing global economic conditions.

 

 

 

 

 

 

 

 

Contents

Tesco Plc. Analysis

Executive Summary

Part 1

a). Introduction

b). Profitability Ratio Analysis

Net Income

Return on Equity

Return on Assets

c). i). Liquidity Ratio Analysis

Current Ratio

Quick Ratio

c). ii) Leverage or Gearing Ratios

Debt-Equity

Solvency Ratio

d). Value Ratios

Price Earnings Ratio

Earnings Per Share

Assumptions

Part 2

Tesco Plc. Stock Evaluation

Price Earnings Ratio

Conclusion

Reference

Appendices

Tesco Plc. Performance Summary

 

Part 1

 a). Introduction

a). Tesco Plc. Is a UK multinational company that deals in groceries and general consumer goods. The company’s head offices are in Hertfordshire in England but its operations spread across seven countries in Asia and Europe (Tesco 2015). Tesco is among the largest supermarkets in the world with average revenue of £57.491billion in 2018 while employing over 460,000 employees (Tesco 2017).  Tesco shares are traded on London Stock Exchange and it is one of its FTSE 100 constituent Index (Yahoo Finance 2019). The company has a market capitalization of £18.1 billion and over six thousand five hundred and sixty outlets globally. The company registers over eighty million shopping trips every week among its global outlets.

X5 Retail Group is one of the largest Russian food retailers. It operates several different format retail formats. The company’s proximity stores trade under the name Pyaterochka brand while average supermarkets trade as Perekrestok brand while the hypermarkets are Karusei. Its global depositary is listed in London Stock Exchange and also the Moscow Stock Exchange (X5 Retail Group 2015).

Lenta Ltd is Russia’s second largest hypermarket and supermarket chain. It was founded in St. Petersburg in 1993 by Oleg Zherebtsov initially as cash & carry before developing as one of the country’s largest hypermarket brand(Yahoo Business Finance 2019). Lenta limited currently has over 122 hypermarkets across Russia and twenty seven supermarkets in Moscow (Lenta Limited 2017).

b). Profitability Ratio Analysis

Profitability ratios are used to identify the areas of weaknesses and strengths within a company. The ratios also assist in pointing out areas where opportunities are available in a company. Net income margin is the ratio of the net income compare to the sales revenues. Tesco profitability performance was the least compared to the other two companies. In 2013 Tesco registered 0.19% net income margin compared to X5’s 38.20% and Lenta’s 4.92% during the same year as illustrated in Table 1 below.

		Profitability Ratios
		Net Income
	2013	2014	2015	2016	2017
Lenta Ltd	4.92%	6.03%	3.33%	3.56%	3.56%
X5 retail Group	38.20%	2.00%	1.75%	2.16%	2.42%
Tesco Plc.	0.19%	1.53%	-8.45%	0.24%	-0.10%