After filling out the ratio report for GoPro you can begin to see that they are doing very well for themselves considering that they have only been a publicly traded company for just a few years. When you look at their numbers with everyone else you see that they are making great use of their assets to generate profit for the company, they are collecting money in a short time back from products that they sold on credit and they are staying away from being in debt. I am going to break down how well GoPro is doing in this fiscal term for themselves, and compared to everyone else in their competitive market.
- Current Ratio
GoPro: When you look at the current ratio of GoPro, which tells us whether or not the company’s current asses will cover their current liabilities at the moment you see that they are at 1.32. This means that they are able to cover those liabilities at a good rate.
Comparing: GoPro which like I mentioned above is at 1.32, they come in second to last behind Kodak (2.23) Daktronics (2.05) Real D (1.50) and then behind GoPro is Sony at 0.88. This shows us that for being a young company they are avoiding debt and high expenses
- Quick Ratio
GoPro: When it comes to the quick ratio which excludes the inventory that is not able to be converted into cash at that moment, will they still be able to cover current liabilities with the assets they do have. As we learned in the lecture anything below 1 means no, and GoPro is at 0.88 which of course is below 1. GoPro has a lot of unsold inventory and must figure out a way to sell that inventory in order to cover the current expenses.
Comparing: Compared to everyone else GoPro is mightily struggling. Only one other company is not able to cover the current expenses without including inventory, that being Sony. Everyone else is doing very well with Kodak leading the way. This is not something that would scare me away from GoPro, because like I mentioned before and like you will see for the rest of this post, they are a very young company only being traded publicly now for a few years. The fact that they are above Sony who has been in business for years and is a powerhouse across the world, shows me that GoPro is doing something right.
- Cash Ratio
GoPro: Cash ratio shows us if a company is able to only use their current cash to cover the liabilities that they have at that time. GoPro at the moment does not have enough cash alone to cover their current liabilities and therefore must make moves in order to do that if needed. They are currently at 0.54 which is quite a bit lower than 1 which is where they need to be to cover the liabilities
Comparing: Comparing GoPro to Daktronics, Kodak, Sony and Real D shows us just how young of a company they are and that they will need time to create more cash flow. We have learned a lot about GoPro over the last five weeks and one thing that really sticks out to me when it comes to this category is the fact that they require a lot of help in producing their cameras. With time and more money spent on research and development, GoPro will be able to bring this number up but at the current time the bigger and more established companies are leading the way but none of them are above 1.
- Total Asset Turnover
GoPro: GoPro is VERY efficient in using the current assets to generate sales and revenue for the company. This is something that is very encouraging, and would be a huge factor when deciding whether or not to invest in their stock. Total asset turnover shows us if a company is effective in using their current assets to generate sales. Coming in at 2.65, tells us for every dollar in assets, GoPro is able to make $2.65.
Comparing: When you take the number that GoPro is making off their assets and compare it to the rest of the company’s, they are doing the best by over a dollar. This shows us that GoPro is very productive with their money and they are able to use them efficiently. It is quite surprising in my opinion that companies like Sony and Real D are not making a higher number and are both below 1.
- Average collection
GoPro: The average collection ratio tells us if a company is collecting money for products that are lent out to other vendors and indepdent companies on credit in a reasonable amount of time. At the moment GoPro is collecting money in almost 18 days, which is a very good number and would be another reason to consider investing in them. They are lending out a lot of products as we saw in the previous lectures and they obviously are selling well (or at least somewhat well) and they are collecting in a very effective manner
Comparing: when you compare GoPro to the other four companies you see that they are again the best in this category. The next closes company is Sony and they are collecting in 49 days!! GoPro is doing something right in order to collect the money for their products in such a short manner. This could be high sales, or just a very strict policy on lending products on credit. Either way it is for sure contributing to the high number of turnover in assets.
- Debt Ratio
GoPro: When you look at the debt ratio for GoPro you see that they have a “middle of the road” debt ratio, still relying on borrowing to finance operations. This can go back to the point of using other companies for production. With GoPro being a young company this is something that is not alarming, but is to be taken into consideration when looking at buying stock in GoPro.
Comparing: When you compare the 5% of GoPro to the other four companies you see that a lot of them are not doing well in this category, especially Sony and Kodak. We know that both of these companies have struggled with profits and making money and have required a lot of borrowing to stay away from going bankrupt. However, we see that Daktronics and Real D are both doing very well in comparison to GoPro, but it is not bad that GoPro is still not on the same level as them.
- Net Profit Margin
GoPro: The net profit margain of a company shows us the true earnings after taxes and interest hits the income made. GoPro is still not making a large profit after interest in taxes. However, I know I keep touching on this, but being such a young company they are doing just fine at 5%. They will take time to pay off the rest of their debt, and using extra money for research and development, and soon I guarantee that number will be higher.
Comparing: When you look at the 5% of GoPro compared to Daktronics, Real D, Sony and Kodak you see that they are again somewhere in the middle. Sony and Real D are both at negative numbers which shows us that they are losing money. While Kodak is making 85% total profit after interest in taxes. I believe that when looking at the yearly financial statements of GoPro you see that this number has increased, and will most likely continue to increase
- Return on Assets
GoPro: The return on assets shows us the profits earned on investments of assets. GoPro is at 12% which is fairly high for a younger company. This says that they are investing their money wisely with the assets that they currently have.
Comparing: When you compare the 12% of GoPro to the other four larger companies you see that they are doing very well, coming in second behind Kodak who is at 65%. I believe that this says a lot about the future of GoPro as they are using the money wisely for research and development and may be on the brink of doing things such as, finding profits in sharing (Facebook, twitter, Instagram) and producing a lot more of their own pieces of equipment and cameras. This will go a long way in producing more profits for GoPro in the future.
- Return on Equity
GoPro: Another category that shows us just how successful GoPro has been since becoming a public company. The return on equity ratio shows us the profits that are earned on investments by the current stockholders. Right now the stockholders are getting a 50% return, while we have seen that the average is 8%. Obviously, it is still too early to tell whether this number will last, but stockholders have to be encouraged by this number.
Comparing: GoPro is doing very well for a young company at 50%, but obviously Kodak is destroying the competition at 316% return on investment to stockholders. However we have seen companies who have done great, have epic collapses and with new technology coming around you have to wonder if Kodak will be able to survive in the long term.
In looking at the five companies that are competing in the electronic, technology markets we see that size does matter, but not to the extent that you may think. When looking at these companies for the first time you see two powerhouse names, Kodak and Sony. These are companies who have produced products that everyone for the most part has used, however the numbers tell a different story. Sony has very low numbers in nearly every category and is on the verge of collapsing in my opinion, whereas Kodak, a company who has produced technologies that we really have no use for anymore is doing the best of everyone at the moment. However you see that companies like GoPro, who have only been public for a few years, are beginning to grab a large portion of the market shares. GoPro is already doing a great job of making a great return on their current assets, the stockholders are seeing a great return on investment and the company is still able to spend money on research and development in order to take a giant step in their business. If I was given $1,000 today to invest in one of these five companies I would really struggle between two of them. One being GoPro and the other being Kodak. GoPro really does strike me as a company that can be successful long term because of how well they have done in a few years, but we have seen multiple camera companies who have created the “latest and greatest” products that sell for a few years and then are nowhere to be found in a couple of years. Kodak has been a big name for a long, long, time and they continue to reinvent themselves, finding ways to get their products out to people in whatever way is possible. If you put a gun to my head, I would probably invest in Kodak just because of how long they have been around and what they have done to reinvent themselves the past few years. The way technologies come and go is what would honestly keep me away from GoPro.