Price to earning ratio is depended on more than the other finance numbers. It signifies how much the market will pay for a company’s earnings. (Little, 2007). This figure is arrived at by dividing the stock price by the Earnings Per Share (EPS). All data used in this document can be found in the tables listed in the back pages. Tables 1 and 2 reference Riordan Manufacturing and Tables 3 and 4 references Huffman Trucking. Riordan Manufacturing Riordan Manufacturing conducts business internationally and has manufacturing plants in both the United States and China.
In the global market the company appears to be strong and thriving amongst its pears in the industry. Riordan’s current ratio is slightly favorable to the rest of the plastics and rubber industry. The company’s ratio is 2. 09. (See Table 1) Though the number is favorable it is slightly high and means that a closer look at how the company is investing its cash on hand may be in order. Riordan maybe able to invest a little more of its profits but over all is in good financial shape. Riordan has a strong debt ratio of .
This figure was determined by dividing the company’s total debt by its total assets. The Forbes Company recommends debt ratio’s of less than one. This shows the company has more assets than debts and Riordan again looks strong by this numerical measuring standard. Riordan’s profit margin is also in line with industry standards and stand at a healthy 17. 29%. This figure means it makes about 17 cents on the dollar. The company’s ability to earn capital of its assets is almost twice that of the industry average.
Riordan’s return on investment (ROA) is 9%. The final measurement used in this report is the Price to Earning Ratio, or P/E. Surprisingly Riordan Manufacturing has a P/E half of the industry standard. Using Reuters Industry Investment Center as a source for all industry standards in the Fabricated Plastics and Rubber Industry, Riordan is value is half of the 17. 28 stated industry standard. It should be noted that this could be due impart to comparing Riordan Manufacturing’s 2005 annual statement with current 2006 annual standards.
Huffman Trucking Huffman Trucking is a long haul transportation company with hubs throughout the United States. The P/ E of Huffman is much higher than the industry average and may suggest that the stock is over priced. The rest of the numbers Huffman Trucking reported fall inline with the rest of the trucking industry but does leave room for improvement in several areas.
Its current ratio of 1. 26 is a little low and should be raised to at least 1. 5. A low debt ratio of .32 shows that the company does have a strong asset to debt ratio that is a good indicator that the company is not a high risk. Huffman’s ROA is one of the areas the company is doing very well in. The company is ahead of the industry in maximizing returns on its capital. The company is doing a good job of making money with its trucks however, it needs to cut down its cost of operations in other areas because its profit margin is well below the average.
Huffman Trucking has a profit margin of only 3. 60% drastically lower than the industry average of 26.05%. As a result the company has poor flexibility in pricing and needs to improve its cost management.
American Express: Retrieved August 8, 2007 from http://www133. americanexpress. com/osbn/tools/ratios/returnonasset. asp Forbes Media Company: Retrieved August 8, 2007 from http://www. investorpedia. com/terms/d/debtratio. asp Fabricated Plastics and Rubber Overview: Retrieved August 8, 2007 from http://www. investor. reuters. com/IndustryCenter. aspx? industry=FABRUB&target=/industries/indhighlights/industrycenter