SANTOS Limited Company: Australian Stock Market Research Paper

Exclusively available on IvyPanda Available only on IvyPanda
Updated: Mar 7th, 2024

Introduction

The Australian stock market is a place where people who plan to work with other investors from different cultural, political and environmental background. Many persons or companies invest money in the stock market with the hope that they will benefit rise and fall of the stock market prices. The following paragraphs will touch on the relationship or non -relationship between the stock market price and the other business factors (Hood, Rothstein, and Baldwin 2004, 177).

We will write a custom essay on your topic a custom Research Paper on SANTOS Limited Company: Australian Stock Market
808 writers online

Body

SANTOS Limited is a Petroleum company listed in the Australian stock Market.

Financial Performance of the Company

Table 1. The company had generated a margin

Profitability Ratios
CompanyIndustrySectorS&P 500
Gross Margin (TTM)41.3727.4324.4636.9
Gross Margin – 5 Yr. Avg.57.5157.820.2936.96
EBITD Margin (TTM)58.01
EBITD – 5 Yr. Avg67.6645.2214.3621.18
Operating Margin (TTM)31.489.969.24
Operating Margin – 5 Yr. Avg.38.0936.9811.3418.16
Pre-Tax Margin (TTM)25.7910.968.8214.87
Pre-Tax Margin – 5 Yr. Avg.35.637.6411.4117.94
Net Profit Margin (TTM)17.987.416.0610.93
Net Profit Margin – 5 Yr. Avg.24.9416.725.8712.63
Effective Tax Rate (TTM)30.2913.4122.1625.39
Effecitve Tax Rate – 5 Yr. Avg.29.9346.8521.6130.48

The above table shows that the monthly gross margin of Santos Limited is 42. This is definitely higher than the gross margin of the petroleum industry where Santos Limited is a competitor thereon. The Industry gross margin for the month is only 27.43. The company, STO ltd, also has a higher gross margin than the average sector. The industry’s gross margin is only 224.46. Santos Ltd’s data is also higher than the 36.9 figure generated by Standard and Poor for the month.

On the other hand, the company’s gross margin average for the past five years is only 57.51. This is slightly lower than the industry ratio of 57.8. The company’s five year average is surely higher than the sector ratio of only 20.29. The company data shows a higher figure than the standard and poor data amounting to only 36.9 only.

In addition, the EBITD for the past five years shows that the company, Santos Ltd., generated a 67.66 figure. This is clearly higher than the EBITD of the entire petroleum industry listed in the Australian Stock Exchange of 45.22. The company’s EBITD figure is also higher than the EBITD figure of the sector group amounting to only 14.36. The Standard and Poor’s figure of 21.18 is only lower than the company’s EBTD figure.

In addition, the operating margin of the company for the past month is 31.48. This is definitely higher than the current month’s operation figure for the entire fuel industry at 9.96. The company’s four five year operating margin is high at 38.09. However, this figure is not enough to reach the 36.98 figure established by the petroleum or fuel industry players. The company’s ratio is also higher than the sector group where its operating margin of 38.09 is very high when contrasted with the Standard and Poor’s generated ratio of only 18.16.

1 hour!
The minimum time our certified writers need to deliver a 100% original paper

The company’s monthly pretax margin is 25.79. This is higher than the petroleum industry sector ratio of only 10.96. The company’s figure is also higher than the sector figure of 8.82. Likewise, the company’s figure is also higher than the Standard and Poor ratio of only 14.87.

The company’s pre -tax five year margin is 35.6. It is clearly higher than the industry figure of 37.64. The company’s figure also is higher than the sector group whose data shows an 11.41 figure. The company’s figure is also higher than the Standard and Poor’s five year figure of 17.94.

The net profit margin of the company for the month is 17.98. This is clearly higher than the industry figure of 7.41. The company figure is also higher than the sector figure of 6.06. The Standard and Poor figure is only 10.93 which is than lower than the net profit margin.

The net profit margin of the company for a five year average is 24.94. This is higher than the industry figure of 16.72. This is also higher than the sector figure of 5.87. This is also higher than the Standard and Poor figure of only 12. 63(Campbell & Brown, 2003, 50).

STO 2007ST0 2006
in Au$000in Au$000
Two year earnings growth(0.14)
Two year revenue growth0.00
Two year Net Income44,641.0051,847.00
Two year Revenue522,797.00521,482.00
Two year Earnings per share13.8015.82
Two year Asset483,218.00458,823.00
Two year Equity177,275.00167,833.00

In terms of two year growth, the company generated a two year growth of -14. This negative figure was due to the decline in the company’s net income when contrasting the net income of 2006 and 2007. The net income for 2006 is $51,847 which is higher than the 2007 net income amounting to $44,641. The sales of Santos Ltd during 2006 was lower than the 2007 figure. The 2006 amount is $51,482 and the 2007 figure is $522,797.

The company generated the earnings per share figure of 13.80 for the year 2007. This is lower than the 2006 earnings per share amount of $15.82.

The company total asset amount was $483,218 for the year 2007. This is clearly higher than the 2006 amount of $458,823. The company’s financial statements also show that the company amount was $177,275 for the year 2007. This is higher than the 2006 figure amounting to only $167,833.

Remember! This is just a sample
You can get your custom paper by one of our expert writers
Management Effectiveness
CompanyIndustrySectorS&P 500
Return on Assets (TTM)6.673.756.618.17
Return on Assets – 5 Yr. Avg.8.912.995.637.53
Return on Investment (TTM)7.795.4811.1411.23
Return on Investment – 5 Yr. Avg.10.0916.617.7110.07
Return on Equity (TTM)13.597.3789.7620.13
Return on Equity – 5 Yr. Avg.16.6122.1111.0520.34

The company was able to generate a return on assets for the month amounting to 6.657. This is higher than the industry figure of only 3.75. The sector figure is close behind with the figure amount of 6.61. The company’s figure is clearly lower than the Standard and Poor figure amounting to 8.17.

The company’s return on assets for the month shows that the company figure is 8.9. This is clearly lower than the industry figure 12.99. The company’s data is higher than the sector figure which is pegged at 5.63. In the same light, the company figure is higher than the Standard and Poor figure of only 7.53.

The company’s return on Investment for the month shows a figure of 7.79. This is clearly higher than the petroleum industry figure of only 5.48. The company data is also lower than the sector data because the sector figure had already reached 11.14. The company’s figure is also lower than the Standard and Poor data amounting to 11.23.

The company’s return on investment for the five year period is 10.09. This is lower than the industry figure of 16.61. The company figure is higher than the sector return on investment amount of 7.71. The company figure is also higher than the Standard and Poor figure of 10.07.

The return on equity figure of the company for the month is 13.59. This is higher than the industry figure amounting to 7.37. The company figure is very much lower than the sector figure of 89.76. The Standard and Poor figure amounting to 20.13 is surely higher than the company figure of only 13.59.

The return on equity figure of the company for the five year average figure is 16.61. This is lower than the industry figure of 22.11. The company figure is clearly higher than the sector figure amounting to 11.05. The same company figure is clearly lower than the Standard and Poor figure of only 20.34.

The discount rate to be used in this analysis should be 6%. This is based on the Australian Treasury bond rate.

Link between share price and EPS

Share price

The above graph shows that there is no clear pattern when the stock market price is compared with the earnings per share figure. The graph above shows that there is a tendency for the stock market price to decrease if the earnings per share increases. However, there is a complete turnaround when the next meeting point between the market price and the earnings per share. Next, the stock market price makes another complete turnaround. The stock market price again decreases as the earnings per share increases. This would indicate that stock market prices will not be directly affected by the earnings per in all business situations.

We will write
a custom essay
specifically for you
Get your first paper with
15% OFF

Effect of different Growth Rates on the Share Price

CompanyIndustrySectorS&P 500
Sales (MRQ) vs Qtr. 1 Yr. Ago16.1743.21131.8311.67
Sales (TTM) vs TTM 1 Yr. Ago1.9113.87108.7513.21
Sales – 5 Yr. Growth Rate10.9732.2314.7115.01
EPS (MRQ) vs Qtr. 1 Yr. Ago19.6521.08-34.0116.53
EPS (TTM) vs TTM 1 Yr. Ago-9.30
EPS – 5 Yr. Growth Rate10.7330.0317.3019.44
Capital Spending – 5 Yr. Growth Rate24.4735.6016.2513.45

The above graph shows that the company sales figures compared between one quarter in 2007 and the same quarter in 2006 shows that the company generated 16.17 growth rate. This is clearly lower than the industry growth rate of 43.21. The company figure is clearly lower than the sector data of 131.83. However, the company figure is higher than the Standard and Poor figure of only 11.67. The sales growth figure of the company when compared with the same month of the prior accounting period shows that the company generated a growth rate of 1.91. This is clearly lower than the growth rate of the industry. The industry figure is 13.87. The company figure is also lower than the sector figure which is 108.75.

The company figure is also lower than the Standard and Poor figure of 13.21. The Company’s five year growth rate is 10.97. This is lower than the industry growth rate of 32.23. Also, the company data is lower than the sector figure amounting to 14.71. The company figure is also lower than the Standard and Poor data of 15.01.

The company’s earnings per share growth figure for the quarter is 19.65. This is lower than the industry figure amounting to 21.08. The company figure is also higher than the sector data of -34.01. The company figure is also higher than the Standard and Poor figure amounting to 16.53.

Share price

The above graph shows that the company generated there is an almost ten percent. However, the growth rate does not materially affect the stock market prices. This graph shows that the company’s stock market prices can fluctuate upwards or downward without materially taking into consideration the company’s need growth rate.

Santos LimitedSTO
DATE20072006200520042003
REVENUE1,280.401,207.101,425.801,292.301,443.70
MARKET PRICE14.129.3013.109.286.23
NET INCOME178.40262.20273.90369.50472.60
Net Income Growth Rate(0.32)(0.04)(0.26)(0.22)
Net Profit Ratio0.140.220.190.290.33

The above graph shows that the company has been generating a decrease in net income for the past five years. The net income of 2004 amounting to $369.5 is lower than the prior year’s net income. The net income of 2005 amounting to $273.90 is lower than the prior year’s net income. The net income of 2006 amounting to $262.20 is lower than the prior year’s income statement. The net income of 2007 amounting t $178.40 is clearly lower than the net income of the prior year, 2006.

Market price

The above graph shows that the company’s net income growth rate will increase if there is an increase in its market price. The graph above shows that the net income growth rate had dropped by a rank that was even lower than -30 when the market price had increase to as high as $15.

Measurement of Risk to Shareholders

R = Rf – B(Rm-Rf)

Where: Rm = Expected Market Return, Rf = Treasury Bill Rate, R = Risk measurement to shareholders, and B = beta

R = 6 – [1.16(.14– 6)]

= 13.

Is the Share overvalued or undervalued?

2007
Total Equity=3310.5
591.96
=5.5924387

The market price is overvalued. Because the market price on December 31, 2007 was quite high at $14.12 only. The amount was arrived at by dividing the total equity by the total outstanding stockholders reached only 5.59 per share.

Conclusion

What influence would you expect your share to have on the performance of a portfolio?

The share of the company, Santos Ltd, would surely influence the other shares of stocks that the investor would mix in a portfolio. A portfolio is a conglomeration of many stocks in one big basket. The decline in the market value of one stock would be remedied by the increase in stock market prices of the other stocks mixed into one stock market basket. (Beenhakker 1996, 16).

Works Cited

Beenhakker, Henri L. 1996. Investment Decision Making in the Private and Public Sectors. Westport, CT: Quorum Books.

Campbell, Harry E, and Richard P. C. Brown. 2003. Benefit-Cost Analysis: Financial and Economic Appraisal Using Spreadsheets. Cambridge, England: Cambridge University Press.

Hood, Christopher, Henry Rothstein, and Robert Baldwin. 2004. The Government of Risk: Understanding Risk Regulation Regimes. Oxford, England: Oxford University Press.

Brigham, E., Gapenski, L., 1985, Financial Management –Theory & Practice, London, Dryden Press, 180.

Financial Statement Analysis, Theory Application and Interpretation, 1993, London, Irwin Press, 27.

Gitman, L., 2000, Principles of Managerial Finance, England, Addison –Wesley, 236.

Holmes, P., Investment Appraisal, 1998, London, Thomson Press, 14.

Keon, et al., 1994, Foundations of Finance, London, Prentice Hall, 260.

Weston, J., Birgham, E., 1981, Managerial Finance, London, London, Dryden Press, 94.

Weston, J., Brigham, E., 1993, Essentials of Managerial Finance, London, Dryden Press, 99.

Raiborn, C., Barfield, J., Kinney, M., 1993, Managerial Accounting, Los Angeles, West Publishing, 760.

Print
Need an custom research paper on SANTOS Limited Company: Australian Stock Market written from scratch by a professional specifically for you?
808 writers online
Cite This paper
Select a referencing style:

Reference

IvyPanda. (2024, March 7). SANTOS Limited Company: Australian Stock Market. https://ivypanda.com/essays/santos-limited-company-australian-stock-market/

Work Cited

"SANTOS Limited Company: Australian Stock Market." IvyPanda, 7 Mar. 2024, ivypanda.com/essays/santos-limited-company-australian-stock-market/.

References

IvyPanda. (2024) 'SANTOS Limited Company: Australian Stock Market'. 7 March.

References

IvyPanda. 2024. "SANTOS Limited Company: Australian Stock Market." March 7, 2024. https://ivypanda.com/essays/santos-limited-company-australian-stock-market/.

1. IvyPanda. "SANTOS Limited Company: Australian Stock Market." March 7, 2024. https://ivypanda.com/essays/santos-limited-company-australian-stock-market/.


Bibliography


IvyPanda. "SANTOS Limited Company: Australian Stock Market." March 7, 2024. https://ivypanda.com/essays/santos-limited-company-australian-stock-market/.

Powered by CiteTotal, the best bibliography maker
If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda. Request the removal
More related papers
Cite
Print
1 / 1