MBA403 Financial Analysis Report on CSL Limited Assessment 3 Answer
This report reveals the key understanding on the financial analysis so the CSL company. CSL Limited is Australian multinational biotechnology company founded in 1916 as Commonwealth Serum Laboratories in Melbourne. CSL is registered at ASX and among the ASX 20 having a market cap of AUD 144.751 Billion. CSL Limited is operating in biotechnology industry of healthcare sector in Australia, the United States, United Kingdom, Germany, Switzerland, China and internationally. CSL Limited is engaged in research, development, manufacturing, marketing and distribution of its biopharmaceutical and allied products in market. CSL Limited is operating through its two segments – CSL Behring and Seqirus headquartered in King of Prussia, USA and Maidenhead respectively. CSL Behring segment engaged in providing plasma therapies used to treat immunodeficiency, Alpha-1 antitrypsin deficiency, bleeding and neurological disorder.
This report analyses the financial performance and position of the company in respect to industry and competitors, based on profitability, liquidity, trend, cash flow analysis etc. as well on the basis of non-financial key performance measures. The CSL company Along with plasma therapies, segment conducts research on plasma and non-plasma related therapies, receives royalties from commercialization of intellectual properties and license. The Seqirus segment provides non-plasma bio therapeutic products and engaged in development of influenza vaccines.
Key financial information: CSL Limited has the market cap of 144.751B and beta of 0.29. The Earnings per share for trailing twelve months are 4.23, and price-earnings ratio for the same point of time is 75.73 times. CSL limited had a strong year from revenue and earnings perspective as the company’s revenue grow by 11% and profit was up by 17% at constant currency which helped in maximizing portfolio value of stakeholders (CSL Company, 2019).CSL Limited’s revenue for period ending June 2019 was 8.54 Billion and net profit for the period was 1.92 Billion at a rate of whopping 22.47%. With these key financial data, CSL Limited has the enterprises of 149.02 Billion, 17.45 times of the revenue of company and 52.95 times of EBITDA for the year. Cash flow from operations of the company in last twelve months is 1.64 Billion (CSL Company, 2019).
Ratio analysis – Major ratios for analyzing management effectiveness are return on equity and return on assets, return on equity and asset for the year of CSL Limited is 41.12% and 13.56% respectively (CSL Company, 2019).
Solvency and ratios related to capital structure of the company are debt to equity and debt to assets, which for CSL Limited are 0.89 and 0.38 respectively.
Vertical analysis – Out of total revenue, CSL Limited had gross margin of 55.80%, after taking into account the operating expenses of the company, company earned operating profit at 29.09%. The net margin of the company for the year is 22.55% (CSL Company, 2019).
Shareholdings – Total outstanding shares of CSL Limited are 907.74 million, out of these, 0.2% are held by the institutional owners, and the insider ownership of outstanding shares of the company is zero. Less institutional holding makes the company preferred for investment.
News – CSL was in news in year 2018-19 mostly for its research and developments, fellowship programs and relief and social responsibilities activities (CSL Company, 2019).
Non-financial measures: Other areas of measuring the performance of the company beside all the financial data are employee retention, progress in research and development, expansion etc. for the company. CSL Limited achieved 74% employee retention and total workforce increased by 13%. Further company opened 30 new plasma collection centers and developed research facility for New Bio21 in Melbourne (Azwin, Sadalia, & Irawati, 2019).
Interpretation of current major financial information – Increase in revenue and profits for the company in the year shows the strong financial position of the company and the phase in which it having the returns on research programs undertaken. The stock market has also responded accordingly as the price-book value ratio is 27.61 times. Further the stock price change in last one year of the company is 67.61% in comparison to 23.47% of the S&P500.
Ratios – Management efficiency ratios of the company shows the high return on the equity and assets, however the data for the year are lower comparing with the previous years as the return on equity in 2018 48.38 in 2018 which decreased to 40.69 in 2019 (Bayrakdaroglu, Mirgen, & Kuyu, 2017). Though return on total invested capital which also consider the debt of the company, compensate the return on equity drop as the ROIC is 23.74% in 2019 which is up from the 22.63 in year 2018 (Chen, & Shimerda, 2011).
Vertical and trend analysis – Vertical analyses of the income statement for 2019 shows the strong profitability of the company, the analysis of vertical analysis with the prism of trends in respective figures again shows the satisfactory results as the gross, operating and net profit margin, all of these three are constantly increasing from last three years. In June 2016, the gross, operating, and net margin of the company was 48.65%, 20.84%, and 21.02% which are increased to 55.80%, 29.09%, and 22.55% respectively in 2019 which further shows the improvement in cost management and operational efficiency in cost reduction and revenue generation.
Competitors and standing – revenue growth, and income growth of the company in previous years shows the standing of the company in industry which are 16.90% and 17.20% respectively for last five years (Clare, Seaton, Smith, & Thomas, 2017).
News – Recent news related to the company are featuring company among the best employers in diversity, new researches and appointment of new COO. The news shows the better handling of human resources and indicates the continued engagement in social responsibilities, researches and development. These news provides good insights about overall operation as new researches, social engagement and good employee retention, all of these non-financial measures helps the company in achieving long term financial goals and industry standing (Gombola, & Ketz, 2013).
After analyzing the financial and not financial measures of the performance evaluation and position of the company, CSL Limited termed as the good investment option as most of these measures are favorable from the perspective of investor and stakeholders. The major measures analyzed include the profitability, management efficiency, vertical analysis and analysis of news and other non-financial measures such as employee retention, employee diversity and research outcomes etc. The financial analysis of the company depicts the strong and consistent performance of the company as the profitability is high and increasing constantly as well. Further non-financial measures also shows the progress of the company in respect to research, human resource management. All of these factors makes the CSL Limited a good option to investing in.