Stock and Market Analysis: Coca Cola Company-Canada - Assignment Example

Stock and Market Analysis Assignment Coca Cola Company-Canada Table of Contents Table of Contents 2 Introduction 3 Market/Economic Analysis 4 Individual Stock Analysis 7 Analysis Using the PE Model 8 Conclusion 10 References 11 Introduction At the beginning of this course, I created seven portfolios involving different stocks by using the Finviz Stock Screener. This report will analyze the North American stock market indexes and economic whereby I will focus on Canada as a country. Then I will examine the stock that I chose and the most impactful stock from my best performing portfolio. For the stock analysis, I will choose the Coke cola company in Canada. In the analysis of the two stock analyses, I will use Price-Earnings (PE) model to help me formulate the analysis. The stocks in this report will be investigated using the technical and fundamental methods that I have learnt during the course. The data used in this report were formulated with the assistance of a mixture of tools such as journals, required books, Google, Yahoo, Finviz and general knowledge of the markets and companies. With the use of Finviz, I formulated some portfolios to research about the rate of performances of each stock over the past several months. The following chart portrays the total returns of each portfolio from highest to lowest. Data collection was stopped on December 3, 2014. According to the graph, the best overall performing portfolio was “Supermarket” and the worst performing portfolio was “Group”. Market/Economic Analysis Canada is a high tech industrial country which can be ranked as the trillion dollar class.The economic status of Canada is simillar to the united states econimic status whereby it contains certain economic features that simillar.The features include the pattern of production, market-oriented economic system and the high living standards.The growth of the Canada economic status is experienced since the world war II whereby the extensive growth of the mining, manufacturing and service sectors has made the country to transform from a rural economy into industrial and urban economic system. The 1994 North American Free Trade Agreement (NAFTA) and the 1989 US-Canada Free Trade Agreement (FTA) significantly triggered the growth of the Canada’s economic nature. The treaty included the Mexican country. The treaty led to the dramatic increase in economic and trade integration with the United States making it the principal trading partner for Canada. The country’s score over time has been as shown below: Canada enjoys extensive trade surplus with the United States whereby the trade absorbs about three-fourths of Canadian merchandise exports each year. The United States largest foreign supplier of energy, including oil, gas, uranium, and electric power is Canada. This is because of the plentiful natural resources, modern capital plant and highly skilled labor force. This has made Canada to enjoy solid economic growth from 1993 through 2007.Unfortunately, the country experienced global economic crisis whereby the economic status of Canada dropped into a stiff recession in the last months of 2008, and recorded its first fiscal deficit in 2009 after 12 years of surplus. The economic progress of Canada over the years can be summarized in the graph shown below: Later the Canada’s major banks recovered from the financial crisis of 2008-09 ranked as the strongest in the world. This led to the rebirth of the financial sectors custom of conservative lending activities and strong capitalization. Marginal growth of Canada was achieved in 2010-13 in addition to this the country plans to balance the budget by 2015. Moreover, the countrys petroleum sector is extensively expanding; this is because of the presence of the Albertas oil sands, which significantly boosted Canadas proven oil reserves. This has made it possible for Canada to be ranked as the third country in the world in proved oil reserves behind Venezuela and Saudi Arabia. According to recent research the economic freedom score of canada is measured to be 80.2.This has made it possible for the economic status of canade to be ranked 6th freest in the 2014 Index.This score is noted to be 0.8 point higher than last year, portraying improvements in the management of government spending, investment freedom, and monetary freedom.Moreover, Canada retains to be the freest economy in the North America region till today. In the past 20 years Canada has developed its economic freedom score with a range of 10.7 points.This is recorded to be the third biggest improvement among developed economies.The substantial score increases in seven of the 10 economic freedoms, including the supervision of public spending, investment freedom and fiscal freedom have made it possible for Canade to develop its economic freedom nature from “relatively free 20 years ago to “free” today. A comparison of Canada and other nations is summarised in the graph below: According to ancient history, Canada has a long reputation for responsible, honest and responsive government that enthusiastically deals with the existence of corruption in the country (Musgrave, 2014). The country’s foundations of economic freedom are triggered by the judicial system that has an unimpeachable record of independence and precision. Moreover, private property in Canada is well protected by the law and the security forces in the country. The rate of enforcement of contracts in Canada is very dependable, and the rate of expropriation is highly unusual. The nature of protection of intellectual property rights in Canada is steady with world standards. The top federal income tax in Canada has been cut down to 29 percent, and the top corporate tax remains at 15 percent. The other taxes include a property tax and value-added tax (VAT). The overall tax burden in Canada is 31 percent of GDP in the country. The rates of expenditures in the country have dramatically fallen to 41.9 percent of domestic output whereby the conservative-led government tries to balance the budget by 2015. Moreover, the public debt is equivalent to 86 percent of GDP. Individual Stock Analysis The stock I picked to follow throughout this semester was Coke Cola. I chose this stock because Coca Cola is a famous and popular soft drink company. The coca cola company is ranked to be the biggest firm in the area of production, marketing and distribution of non-alcoholic drinks. The company was started in 1886 in Georgia. The brand name coca cola is well known all over the world whereby everyone, everywhere in the world is familiar with the name. The company became familiar to people worldwide after the company was bought by Mr. Woodruff. Mr. Woodruff discovered a way to reach a huge cross-section of people in the world. It is noted that the company started its growth in during the Amsterdam Olympic Games in the summer of 1928 whereby it made huge sales during the sporting event. The company enjoys a large market share in over 200 countries worldwide. This is a signal of the phenomenal growth of a company producing a product that is unique and well marketed. Coca Cola entered the United Kingdom for the first time in 1900 and was later sold at soda fountain outlets. Coca-Cola Refreshments Canada operates the distribution of non-alcoholic drinks in all ten provinces in the country and hires 6,300 people in more than 60 facilities including eight production facilities in the country. Coca-Cola Refreshments Canada is noted to be the single Canadian bottler accountable for customer marketing, manufacturing, national distribution and sales of Coca-Cola brands for a wide assortment of beverages, juices and juice drinks, sports drinks, water and water beverages, energy drinks and teas. Furthermore, the coca cola company also distributes and manufactures other beverage brands. The stock price of the coca cola company in the market is $44.54. Technical Analysis The price of the coca company shares in the stock market has been relatively consistent in the past one year. There has been a drop in the share prices especially in mid February to April after which the situation normalized making it regain its market share in the market. In mid September, there was an acute rise in the share prices when the price rose to $45 and the same was still experienced at the end of November and the shares hit the same mark. According to the graph, the lowest price for the shares was $38 while the highest recorded price was $45. Analysis Using the PE Model According to Yahoo finance, the index PE of the coca cola company is 20 while that of the industry is 23. For the Earnings per Share (EPS) growth, coca colas rate is 9%, which is higher than its major competitors those they have EPS growth rate of about 8%. This makes it have a higher annual EPS than its competitors and this make it have a better competitive edge compared to the rivals in the industry. The earnings in this model are expected to be between $5.00 and $6.00. The PE model would suggest that the current price, $44.54, does not fit within an acceptable range ($115.00 to $144.00). According to the model, I recommend that the stock price is “undervalued”. “Best” Portfolio Analysis The “best” portfolio should have the highest return. My “best” portfolio was “Supermarket”. I had picked this stock with the help of “Finviz Stock Screener”. The portfolio includes one stock that had good performance during three months of reflection. This stock belongs to non-alcoholic drink industry. In this case, we will use the Pepsi Company. Pepsi Company is the best gainer in the portfolio. It is the “most impactful” stock because it earned the most money in the period. Pepsi Company had a total gain of $3301.02, which is 61.88% of the total money in the portfolio; its gain rate is 28.81%. Conclusion The results that I found and presented in this report were consistent with the overall market performance over the three-month period of January through October. One event influenced the North American economy such as the deprecation of Canadian dollars. The event is considered examples of systematic risk, because it affects the world market. The price of stocks for Pepsi boomed over the data collection period. Coca Cola’s performance is also acceptable. References Yahoo finance, (2014). cocacola index, Retrieved on 3 Dec 2014 from http://finance.yahoo.com/ 2014 Index of economic freedom, Wall street journal, Retrieved on 3 Dec 2014 Musgrave, R.A. (2014). "public finance", The New Palgrave: A Dictionary of Economics, v. 3, pp. 1055–60 Read More