Running head: FIN640 MILESTONE THREE
FIN 640 Milestone Three
Name
Southern New Hampshire University
FIN 640
Oct 26, 2017
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FIN640 MILESTONE THREE
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Portfolio
Investing in portfolio is a delicate financial matter subject to the risks that are
involved. All the same, investments are quite beneficial in the long run if the investors in
question are good in striking a balance between risk aversion and risk taking. XYZ Tech
Company is looking to invest in a profitable company in the stock market. The companies
singled out include Apple, Caterpillar, Consolidated Edison, Northern Trust, and Macy’s. As
such the main factors that have to be considered for each company include assets, securities,
and rates of return.
Highest Grossing Prospect
Respective of profit, the highest grossing company among the chosen five is Apple.
Apple makes an average of 80,000 million USD on an annual basis. The table below shows
why Apple would be the best pick with respect to profits.
Company
Highest Annual Profits Realized Between
The Years 2012 and 2016
Apple
93, 626
CAT
18, 820
Consolidated Edison
8987
Northern Trust
4962
Earnings per Share
Earnings per share happen to be a key performance indicator when it comes to matters
of securities and investment. For XYZ to make a decision on what company to invest in, the
projected Earnings per Share for year 2018 will act as an invaluable insight. This is because
the company EPS projections resonate with the confidence of the management. With
consideration for Earnings Per Share, Caterpillar happens to be the best bet for XYZ
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Technology Company. It is quite undeniable that projected EPS is not a better measure of
profitability in comparison to profit. The table shows projected 2018 EPS values for other
companies.
Company
Apple
Projected EPS 3.859
CAT
6.4949
Consolidated
Northern
ED
Trust
3.9354
2.1327
Intrinsic value
Intrinsic value of refers to the actual value of a corporation or an asset with respect to
preconceived notions of its real value inclusive of all aspects of the business, with respect to
both intangible and tangible factors. Being the investment manager of the company, it is my
conviction that Apple Inc. is best placed to innovate and enjoy the reception of market share
within the industry it operates in. This is because the company prefers to make unique smart
phones; devoid of common features and operating systems characteristic of other smart
phones (Bloomberg & Pope, 2017).
Debt Equity Ratio
According to the analysis conducted, the worst performer in relation to debt and
equity is Caterpillar (Debt/Equity =2.8). The first runner up with respect to bad performance
is Consolidated Edison which has a debt equity ratio of 1.11. Among these four companies
that XYZ is considering investing in; Apple Inc is the most stable one since it has the lowest
level of debt as a financial liability (Altman & Hotchkiss, 2010).
Company
Apple
Northern Trust
CAT
Consolidated
ED
Debt/Equity
0.68
0.92
2.8
1.11
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The lower the debt/equity ratio the lesser the financial liabilities that a company has.
According to the table above, Apple is the best candidate since it has the lowest debt/equity
ratio i.e. 0.68. With such a disposition the company is less likely to be bankrupt or go through
foreclosure. In addition to that, the company is less likely to be in trouble with the law subject
to litigation (legal battles) (Nel, 2016).
Executive Summary
Being that Apple Inc presents itself well in terms of grossing, intrinsic value, and
debt/equity ratio, it stands to be the best candidate for the job. The company is historically
known to be innovative and attentive to the wants and needs of customers in the smart phone
industry. For that matter, it can be said that Apple is best placed as the company to invest in;
the one XYZ Tech Company Needs to realize growth and development. Irrespective of the
amount XYZ will invest in, returns are bound to show after the first three quarters of 2018.
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References
Altman, E. I., & Hotchkiss, E. (2010). Corporate financial distress and bankruptcy: Predict
and avoid bankruptcy, analyze and invest in distressed debt (Vol. 289). John Wiley &
Sons.
Bloomberg, M., & Pope, C. (2017). How We Invest. Journal of Applied Corporate
Finance, 29(2), 10-15.
Nel, K. (2016). Invest wisely: management. The Dairy Mail, 23(10), 72-73.