One can tell the value of a company through asset, market, or income approaches. In the asset tactic, one evaluates the company based on its owners equity. The market approach looks at the market coverage, while income strategy looks at the revenues of the organization. Considerably, all the three methods show that Pharma is a vibrant business that is bound to continue outdoing its competitors, but it is not the best for a short term investment.
In the market, the company has covered a broad market, which is a plus on its side. Data shows that 82% of its buyers are loyal to the company, a sign of proper consumer satisfaction strategies. Besides, 18% of its target market know about the company; thus, the organization has a renowned brand name. In fact, that brand name enables it to outdo its chief antagonist, NetPharm. Besides, its internet-based selling enables it to spice purchase experience; customers can acquire goods from the organization with much ease. Elsewhere, the Return on Advertisement shows that 55000 of 223000 people who view the organizations ads buy from the firm. That is, the ads are as effective as shown below:
Returns=Number of impactsNumber of views
That shows that the website is 25% effective, which is a very good percentage for such a new comoany. Therefore, there is no doubt that the company has an extensive market coverage.
Considering the asset approach, one has to acknowledge that the organizations asset worth is quite promising. Notably, the syndicate was once valued at SEK 313 million, yet its current debt SEK 1 million. Assuming that its current worth is still at SEK 313 million, then the owners equity would be:
C=A-L313-1SEK 312 million.
Therefore, the debt to equity ratio would be:
Besides, its investment of close to SEK 20 million on fixed assets improved the conditions of work in the organization, and thereby, maintained the loyalty of its workers. Therefore, Pharmas asset worth is quite encouraging.
Essentially, being that the organization is investing on fixed assets, which has low return on investment, the firm might register a loss of SEK 6.3 million next year. It is projected that its revenue will be SEK 20 million while its total cost will be 26.3 million. Therefore, its profit will be:
However, in the subsequent years, the company is likely to register vast profits that would account for the loss. In fact, it is probable that the firm will only make a loss next year, but never in the subsequent years. Speculation have it that the difference between Y2 and Y1 is:
The difference in profit margin between Y3 and Y2 is:
Then Y4 and Y3 would be:
From the calculations, the profit of the company is expected the increase over some duration in the next few years until it reaches it optimum point of production. Hence, it is not viable in the short run, but it is wise to invest in the organization on a long term basis.
From the analysis, it is evident that the syndicate is quite viable for any long term investor. First, its debt to equity ratio is so low that the firm could settle all its arrears with much ease. Moreover, it is projected to make much profits in the next four years. Therefore, it is a good firm to invest in.
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