Comparative Industry Analysis

By: Russell PellichinoClass: FIN 653Professor: Dr. John Cresson

Liquidity and Leverage(Gaming)

•Liquidity:▫Current Ratio- Pinnacle is most liquid.

Due to high level of inventory.▫Based on Quick & Cash, MGM is most liquid.

•Leverage:▫All firms have been increasing leverage

through debt.▫PENN & MGM, well balanced debt & equity.▫Both have generated high levels of cash

coverage. They can easily afford this debt.

Asset Management and Profitability (Gaming)

• Asset Efficiency:▫All firms are increasing asset efficiency.▫PENN has highest levels in 3 of the last 5 years.▫MGM is lowest, but are consistently making

progress. This is a good sign for the future.

• Profitability:▫All firms have inconsistent PM.▫MGM’s ROE & ROA have increased for 3 years.

Likely driven by increased PM & operating margin.▫PENN has low ROE & ROA.

Likely driven by increased in tax & interest expense.

Market Value and EVA(Gaming)

•Market Value:▫PENN, Isle, & Pinnacle have consistent P/E.

Investors see growth potential.▫All but PENN have increased Market-to-Book.

They are making returns on investor $.•EVA & Competitors:

▫MGM has significantly highest ROIC & EVA.▫MGM also has highest EPS.

They are making $ for shareholders.

My Choice From Gaming Industry

•I like what MGM is doing in their industry:▫Showing progress in asset efficiency.

Potential future upside in profitability.▫Least leveraged, by balanced combination

of debt and equity.▫Taking less risk, making higher returns.

Maximizing shareholders wealth.

Liquidity and Leverage(Merchants)

•Liquidity:▫Current Ratio- all firms are very liquid.

Fred’s highest current ratio all 5 years.▫Quick & Cash- DLTR is most liquid.

FDO consistently increasing.•Leverage:

▫All have balanced combination of debt & equity. FDO is most leveraged.

▫All firms have maintained high cash coverage.

Asset Management and Profitability (Merchants)

•Asset Efficiency:▫All five firms are in a strong position.▫Big Lots has used assets most efficiently.▫DG & DLTR are consistently increasing.

Good sign for the future.•Profitability:

▫DLTR is most profitable; high PM, ROE, & ROA.

▫DG is also increasing in all categories. Likely driven by high operating margins.

Market Value and EVA(Merchants)

• Market Value:▫All five firms are producing high P/E.

Future growth potential in eyes of shareholders.▫DLTR has significantly higher Market-to-Book.

They are generating returns on shareholder $.▫FDO also high & DG is consistently increasing.

• EVA & Competitors:▫DG & DLTR, significantly highest EVA.

DLTR has higher ROIC by more than double DG.▫DG has highest EPS.

They are making shareholders happy.

My Choice From Merchants Industry

•I like what DLTR is doing in their industry:▫Well balanced combination of debt &

equity.▫Making the highest returns.▫Consistently improving asset efficiency.▫Adding significant value.▫Making the highest returns with less risk.

Maximizing shareholder wealth.

Liquidity and Leverage(Motors)

•Liquidity:▫Current, Quick, & Cash- Chevron is most

liquid.▫I like that BP has consistently increased

liquidity, despite recent oil spill.•Leverage:

▫BP is most highly leveraged, but are consistently reducing this leverage. High cash coverage, they can afford this debt.

▫Chevron is least leveraged, & high cash coverage.

Asset Management and Profitability (Motors)

• Asset Efficiency:▫BP has highest asset turnover; Exxon is close

behind.▫Conoco shows promising increases.▫Chevron & Total have slowly declined.

• Profitability:▫Conoco leads in PM, but Exxon is most profitable.▫Exxon has highest ROA & ROE nearly all 5 years.

Likely driven by asset efficiency, low tax expense, & high operating margin.

▫Conoco, Chevron, & Total also showing high ROE. Likely driven by their high PM & Operating Margin.

Market Value and EVA(Motors)

•Market Value:▫All 5 firms have high P/E & Market-to-Book.

Conoco saw most consistent increases in P/E. Exxon Lead Market-to-Book all 5 years.

•EVA & Competitors:▫Exxon lead ROIC & EVA, by a significant

margin. High performance, above & beyond

expectations. ▫BP generated the highest EPS.

My Choice From Motors Industry

•I like what Exxon is doing in their industry:▫Minimal leverage.▫High cash coverage.▫Delegating assets & operating very

efficiently.▫Going above & beyond, adding significant

value to the company.▫In high regard with shareholders.▫Earning high returns for shareholders.