Table of Contents
Berkeley Group Holdings Plc
Ratio Analysis
| Ratio | 30/4/2012 | 30/4/2013 | 30/4/2014 | 30/4/2015 | 30/4/2016 |
| Earnings per share (Basic) | 121.00 | 160.00 | 221.80 | 313.00 | 295.80 |
| Operating Margin | 29.68% | 19.47% | 22.75% | 24.20% | 24.13% |
| Return on Capital Employed | 19.20% | 20.33% | 26.13% | 32.37% | 28.63% |
| PE Ratio | 10.59 | 13.03 | 10.34 | 9.56 | 11.20 |
| Net Asset Value Per Share | 824.65p | 967.84p | 1,052.11p | 1,185.96p | 1,298.74p |
Earnings per Share (Basic)
The basic earnings per share increases from 2012 through to 2015 before falling in 2016. It is 121.0 in 2012 and rises to 313.0 in 2015 before it falls to 295.8 in 2016 (London Stock Exchange, 2017). That shows that the amount of earnings available for the company’s shareholders increases through the years. However, it falls in 2016. The earnings per share shows that the shareholders of the company are able to earn high returns over the years (Mohanty, 2010). Their returns also increase over the years, an indication that the company may be performing well. The drop in 2016 may be an indication that sales may have dropped or costs and expenses increased. Investors would be willing to invest in the company given the positive earnings per share (Iqbal, Muhammad and Sher 2017). That makes it easy for the company to raise capital through the sale of shares, as the shares would be attractive to investors.
Operating Margin
The company has an operating margin that varies through the years. It is 29.68% in 2012 before it falls to 19.47% in 2013. It then rises to 22.75% in 2014 and 24.20% in 2015 (London Stock Exchange, 2017). In 2016, the operating margin for the company falls to 24.13%. From the data, it is evident that the company generates good profits from its revenue. That is evident in the high operating margin it records over the years. However, the operating margin keeps changing over time. The increase may indicate efficiency in managing costs. It could also mean that the company has a good pricing strategy. However, the company also records a fall in operating margin. That may be an indication of increasing costs and expenses in its operations.
Return on Capital Employed
The return on capital employed for the company increases through the years from 2012 to 2015 before dropping in 2016. It is 19.2% in 2012 and rises to 32.37% in 2015 before dropping to 28.63% in 2016 (London Stock Exchange, 2017). That shows that the company’s profitability increase over the years from 2012 to 2015 before slipping down in 2016. It indicates the company’s ability to generate income by utilizing its capital employed. It demonstrates the efficiency of the company in its operations. The company achieves a high return on capital employed through the years. That shows that it is efficient and is able to use its resources to generate income (Guerard Jr., 2013). It demonstrates the company’s ability to give good returns for the shareholders’ investment. That may attract potential investors and would make it easy for the company to raise finance.
PE Ratio
The Price Earnings ratio varies through the years. It rises and falls in different years. From 2012, it rises in 2013 before falling in 2014. It falls further in 2015 before rising again in 2016 (London Stock Exchange, 2017). The ratio indicates how much the company makes in earnings per share. It represents the amount that the company pays each shareholder for each share (Anderson, 2012). From the data, it is evident that the company generates good earnings for its shareholders. However, the amount keeps changing, demonstrating the effects of other underlying factors such as changes in costs and expenses as well as the share prices for the company’s shares. The ratio also demonstrates what the shareholders would be willing to pay for each share. For instance, the PE ratio for 2016 is 11.20. That means that investors would be willing to pay £11.20 per £1 of current earnings. Given the high PE ratio for the company, the investors are likely to expect higher future earnings growth.
Net Asset Value per Share
The Net Asset Value per Share for the company increases through the years from 2012 to 2016 (London Stock Exchange, 2017). That shows that the company’s assets are increasing over the years relative to its shares. It forms a parameter of share price valuation. It represents the value of each share. Given the rising net asset value per share, it is evident that the value of the company’s shares increases over the years (Guerard Jr., 2013). As the value of shares increases, so does the value of the company.
- Anderson, Keith, 2012. The Essential P/E: Understanding the Stock Market through the Price-Earnings Ratio. Hampshire: Harriman House.
- Guerard Jr. John B., (2013). Introduction to Financial Forecasting in Investment Analysis 2013th Ed. New York: Springer.
- Iqbal, Amina, Muhammad Iqbal and Sher Aslam, 2017. Does Earning Per Share Determine the Market Price of Ordinary Shares? Saarbrucken: LAP LAMBERT Academic Publishing.
- London Stock Exchange, 2017. BKG Berkeley Group Holdings (The) Plc ORD SHS 5P. London Stock Exchange. April 19, 2017. Retrieved April 19, 2017 from: http://www.londonstockexchange.com/exchange/prices/stocks/summary/fundamentals.html?fourWayKey=GB00B02L3W35GBGBXSTMM
- Mohanty, Pitabas, 2010. Earnings per Share: Its Forecasting and Relationship with Stock Returns. Saarbrucken: LAP LAMBERT Academic Publishing.