Question

Target and Walmart are in the same industry,  financial statements are available online. Complete several financial ratios for each company and compare them. Share your analysis and answer the following questions.: What did your analysis tell you about these companies? What sorts of decisions would this analysis help you make; such as buying stocks, considering accepting an employment offer,etc.?

Answer 1

Let look at below ratios

Ratios	Target	Walmart
Debt to Equity	109%	70%
Current ratio	0.82	0.93
ROE	25%	18%
Price to Earnings	16x%	20x
Price to book ratio	4.10	3.80

1. Debt to equity of 2:1 is ok. However, here it is 109% i.e 1.09:1 which is ok but as compared to Walmart it high so earning of Target goes more towards debt that shareholders

2. The current ratio is the ability to pay debt/loans taken. 1+ is preferred as we see both companies have less than that but Target is lesser tan Walmart

3. ROE - return on equity it shows how well shareholder is getting the return. Target pays shareholders better than Walmart

4. P/E is the valuation/price of the stock compared to earning. Very high shows overvalued stock here we can see Walmart is priced more than the target

5. P/BV ratio compares Price to book value - high is preferred and is called value stocks. Both companies on similar lines here