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DP World Company - Essay Example

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DP World Company

DP World operates in Europe, Middle East, Africa, Asia Pacific, Indian sub-continent, Australia and in America. The company has taken initiative in the process of reducing frequency of lost time injuries and has been successful in bring down the value of the same to 7.6 in 2011 from 10.1 in 2009. The company also focuses on the internal control of the company related to the organizational structure of the company, code of conduct, whistle blowing policy, risk management and performance, etc. Pensions and post retirement benefits are provided to the employees of the company, which shows that the company takes enough care of its employees even after the termination of employment (“DP World 2011 Annual Report” 1-10). Reason for DP stock being overvalued The stock of a company is said to be overvalued if the current price of the stocks of the company is greater than stock’s intrinsic value. Here the price earnings of the stock are primarily being considered in order to explain the reasons behind the overvaluation of the stocks of DP World. The price earnings ratio of the company has been relatively high in comparison to the historical price earnings ratio of the company, which is why the stock of DP World is considered to be overvalued. The growth in the global container traffic has risen by three times the rate at which the world used to trade in the past decade. This has also benefited the investors of the DP World due to the emerging trend of the global economy. DP World has escaped the Wall Street crunch and the consecutive downturn of the global economy as witnessed in 2008 and have successfully returned to the range of 40% with $2.7 billion of cash along with the long-term debt of the company. Thus, the rise of DP World has been a consistent one. But the company has clearly shown signs of overvaluation with its IPO price which has turned out to be 22times the value of the shares of the company. The main reason behind this is the fall in the share price of the company from $1.20 to $ 0.70 at the time of the global financial meltdown in 2008-09. The IPO rate of the company was traded at a higher range which led to the investors investing in the higher range to get a substantial return from the company. In a process of making quick profit, the stocks of the company became overvalued. Generally, global container companies trade 9 times the earnings of the company, so the DP World’s valuation metrics increased by 12 times the earnings of the company. This resulted in the price earnings ratio of the company to rise at 25 times in 2011. An increase in the price earnings ratio of the company can also be another reason for the over valuation of the stock of DP World. Moreover, listing of the stocks of DP World in the LSE (London Stock Exchange) can be the reason behind the overvaluation of DP World stock. Even the stock split strategy of the company was a reason for the overvaluation of the stocks of DP World. The volatility of the market can result in the valuation of the stocks of the company to be either over valued or undervalued. The consistency of the DP World can be witnessed from the annual report of the company, which shows the company is progressing randomly whereas the financial global economy has not revived likewise causing the overvaluation of the stocks of DP World. However, the fall in the revenue of the company from $3,188,941,000 (in 2010) to $2,977,731,000 (in 2011) is slowly leading to the ...Show more

Summary

DP World Company Introduction DP World is a primary operator of marine terminals and container in the world. In 2011, the company generated revenue of $2,978 million along with an EBITDA of $1,307. Currently, the company is operating in 35 different countries…
Author : cormierkristina
DP World Company essay example
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