Comparison to a Competing Firm
In Mergent Horizon, return to the competitor page, but now enter the list of competitors "As Defined by the Company." From this list select a firm that appears to be one of your firm's closest competitors (this can be the same or different than the firm in question 1-5 above). Return to the Edgar Online I-Metrix financial ratios page, and enter this firm's ticker symbol in the "Compare to" box. In this case, use the "trailing 12 months" option. Use this firm for comparison purposes in this and the following questions that involve comparisons to a competitor.
1. What is the name of the competitor? : Dish Network
a. Which exchange is its stock traded on?
b. What is the ticker symbol of this firm's stock?
c. In which ways is this competitor firm a good match or basis of comparison for your firm?
It could be good match because the blockbuster used to be its major competitor and Dish network acquired the blockbuster last year.
d. In which ways is it not a good match?
2. Report this summary data on leverage for your firm and its competitor.
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Your Firm
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The Competitor Firm
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Debt/Equity
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0.6223
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-17.7418
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Debt/Assets
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0.7906
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1.0366
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Interest Expense/Long term Debt
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0.0501
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0.0748
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Times Interest Earned (TIE)
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12.2922
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3.7171
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Interest coverage
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12.2922
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3.7171
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1. Does it appear to you that your firm has an appropriate degree of leverage, or is over- or under-leveraged? Why?
2. What changes in leverage, if any, do you think would be appropriate for your firm to reduce its WACC?
3. Comparison of the firms' liquidity and operations: First, report this summary data on liquidity and activity for the two firms:
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Your Firm
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The Competitor Firm
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Liquidity
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Current Ratio
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1.4945
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1.1637
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Quick Ratio
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0.5451
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0.9442
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Activity
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Average collection period (ACP)
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Inventory Days
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Operating Cycle
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Cash Conversion Cycle
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Total Asset Turnover
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1.0441
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1.2247
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Capital Expenditure/Sales
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0.0155
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0.0554
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SG&A/Sales
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0.1624
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0.0879
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- Does your firm's liquidity compare favorably or unfavorably to those of the competitor? What areas of improvement, if any, are needed by your firm?
- How does your firm's operations, as measured by the activity ratios, compare? What areas of improvement, if any, are needed by your firm?
4.Analysts' earnings estimates. On Mergent Horizon, find and report the following these data for your firm. If there are any missing estimates, indicate "na."
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Comparison of Earnings Forecasts
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Your Firm
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The Competitor
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Earnings per share for the firm's current fiscal year
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Ending date of the current fiscal year
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Mean estimate of earnings per share for this year
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Low estimate
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High estimate
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Number of analysts
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EPS for the firm's next fiscal year
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Ending date of the next fiscal year
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Mean estimate of earnings per share for this year
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Low estimate
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High estimate
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Number of analysts
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Long term growth rates
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Mean estimate for the next 5 years
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Low estimate
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High estimate
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Number of analysts
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- Consider the ranges of earnings estimates in these three cases relative to the mean estimates. What does this suggest about the reliability and certainty of these estimates?
- Which of these two firms has the better outlook based on these projections? Why?
- Do these forecasts look reasonable to you? Too optimistic or pessimistic? Why?