# Value Creation: Ratio Analysis Of TD Bank

Decent Essays
2. Value Creation – Ratio Analysis There are four key ratios that are detrimental in evaluating the market value of a company’s stock: Equity to Book Value Ratio, Price-Sales Ratio, Price-Earnings Ratio, and Earnings Per Share. The first ratio mentioned, Equity to Book Value Ratio, measures the market value of a company’s stock. It is determined through dividing the current price of the stock by the book value per share. Price-Sales Ratio compares the company’s stock to their total revenue or sales. It is important since in certain cases, companies can have negative earnings, making it more important for some investors rather than PE Ratio. It is calculated through dividing the stock price by revenue. Price-Earnings Ratio key purpose is to …show more content…
The final ratio, Earnings Per Share measures the amount of company profit that is allocated to each share of stock and is useful in determining a company’s profitability.
For the first ratio mentioned above, Equity to Book Value, TD Bank resulted in 1.98, Chase Bank resulted in a 1.65 and Bank of America resulted in a 1.29. As you can see, the results were pretty much equal across the board, with TD Bank having the slight edge of the other two banks. In other words, the market value of the three stocks are very similar, with TD Bank having a slightly higher value. Moving on to the second key measurement, Price-Sales Ratio, TD Bank resulted in 11.91, Chase Bank resulted in a 15.10 and Bank of America resulted in a 16.89. Similar to the Equity to Book Value, the Price-Sales Ratios were also close among the three banks. The only difference being with TD Bank, as their ratio spread from Chase Bank, the next closest result, was 3.2. These results indicate that
Of the three Banks, it looks like Chase Bank is the closest to maximizing its shareholder value, while Bank of America and TD Bank follow closely behind. From an industry perspective, the average for Price Earnings and Price Sales is for the FYE 2016 was 15. From the results, 2 of the three banks (Chase and Bank of America) were above the average while TD Bank was below average. For Price/Book Value, the industry average was 1.16, while all three banks were above that amount. Finally, for EPS, the industry average for 2016 was 7.45, and while all three banks were below this amount Bank of America was well below this average at 1.72. However, despite the low EPS, all three banks performed well above the industry averages meaning that they are considered more profitable and attractive by investors. To combat the extremely low EPS, Bank of America could benefit from a reverse stock split, reducing the number of shares outstanding, as that would increase earnings per share while also increasing the par value of the shares. Looking at company progressions, TB Bank has slightly improved in each ratio from 2012-2015. Chase Bank has also improved in each ratio. Bank of America has had a less stable condition with their ratios, during 2014 and 2012, their P/E Ratios were nearly 50 but then dropped the following years to a more normal amount of close to

## Related Documents

• Improved Essays

In case of NIIT this ratio was 0.64 in 2010 whereas in 3i Infotech it was 0.87. Here NIIT was more financial stable than 3i Infotech. But in last year the ratio of NIIT went to 0.26 in year 2013 and 0.24 of 3i Infotech. From this it can be concluded that 3i Infotech is more financial stable than NIIT. • In table 9 fixed asset turnover ratios of NIIT and 3i Infotech has been calculated.…

• 1545 Words
• 7 Pages
Improved Essays
• Great Essays

• UBS: competes on trading, asset management and investment banking. Table 3 shows 2016 ratios for Goldman Sachs and its competitors. Goldman Sachs performed slightly better than most observed competitors in 2016, with a return on equity (ROE) of 8.48%. Only JPMorgan did better, with a ROE of 9.86%. The 6.03% average ROE was skewed due to Deutsche Bank’s bad performance.…

• 1384 Words
• 6 Pages
Great Essays
• Superior Essays

The North American average for the industry started high at 1.50% in 2012, dipped to a low of .98% in 2014, and has trended up since 2014. Kroger has followed a similar trajectory, but continued its dip until 2015 in which yield dropped to a low of .9%. In one year, it has bounced back to a high of 1.50%. While Kroger follows nearly the same flow as the national average, it’s also obvious that Kroger’s yield has a higher rate of variance. Its highs are higher, as are its lows.…

• 1292 Words
• 6 Pages
Superior Essays
• Improved Essays

For my term project I decided to research convertible bonds further and how they are used in the financial industry. Convertible bonds are extremely interesting as they represent a bond with a stock payout if exercised. Also Convertible bonds act like corporate bonds with lower interest rates because of their possible stock options. There is a give and take with convertible bonds because companies will offer lower yields on these bonds and there’s a possibility that their stocks fall or don’t have economic growth over the maturity which leaves investors stuck with a low yield bond. If a company’s stock prices rise past a certain amount, a company can place a call option on the bonds which can cap an investors profit.…

• 1399 Words
• 6 Pages
Improved Essays
• Improved Essays

On top of that, our portfolio has a correlation of 0.89 with the S&P 500. Each of our stocks are heavily subjected to market risk due to their correlation with the market, fortunately, they are not too correlated between one another.The most heavily correlated stock is XOM, with a positive correlation of .731. AAPL is actually negatively correlated to commodities with a value of -.134. This is due to the fact that AAPL is a technology centric consumer goods company. It also has established very strong margins as compared with its competitors.…

• 905 Words
• 4 Pages
Improved Essays
• Improved Essays

ROA is a tool that helps to show the company’s profits before leverage. The average is 14.50% and the company was valued at 9.22%. Although this number is not extremely low, it does show that it has a lower percentage of the profits in relation to its assets. ROE can be utilized to show how a business profits are in relation to the amount that is withheld as shareholder equity. Valued at 53.83%, Moserk is nearly double the industry average at 28.75%.…

• 709 Words
• 3 Pages
Improved Essays
• Improved Essays

The company has a low ROE and this indicates how well a company's management is deploying the shareholders' capital. As long as it is not negative ROE, it should be seen as a good investment. Because there is a Return on Equity. SWOT ANALYSIS: Strengths, What Ford Motor's does well is that they pay their bills faster than the industry average. Their stock price has been consistent but has lowered since 2016.…

• 864 Words
• 4 Pages
Improved Essays
• Improved Essays

Book Value of a company is equal to the value of its equity, but Market Capitalization is the current market value of its shares (Valuation Techniques Overview, n.d.). Book Value considers tangible assets of a company while calculating the company value, but Market Capitalization is the whole value of both tangible and intangible assets like brand values (Valuation Techniques Overview, n.d.). When the Market Value of a company is more than its Book Value, the buyer is paying more money for something with less value, so it will be loss (Valuation Techniques Overview, n.d.). Conversely, when the Book Value of a company is more than the Market Value, it is profit for the buyer (Valuation Techniques Overview,…

• 803 Words
• 4 Pages
Improved Essays
• Improved Essays

The decrease in EPS because of acquisitions is normal and it can be expected that Estee Lauder’s EPS will increase in the future. Gross Profit rate is calculated by dividing gross profit by net sales. Estee Lauder’s gross profit ratio did not fluctuate much from one period to another, which indicates the company’s pricing of their products is stable. It has an adequate gross margin, meaning the company will be able to pay its operating and other expenses and can further develop the companies it recently acquired, which can bring even more profit for the company. GPR for Estee Lauder are 80.5% in 2015, 80.3% in 2014, and 80.1…

• 1533 Words
• 6 Pages
Improved Essays
• Improved Essays

Industry average represents a \$21.0 ratio. Price Earnings Ratio represents weakness for Company G. M. Book value per share of common stock: Measurement to determine levels of share safety once debt is paid. An increment from 20011’s \$4.25 to a \$5.87 ratio in 2012 tops quartile industry benchmarks (4.9/5.5), 6.0 being the highest. Book Value per Share of Common Stock represents strength for Company G.…

• 903 Words
• 4 Pages
Improved Essays