Financial statement analysis and common stock valuation

Analysis of Short-term (Operating) Activity Ratios
Quarterly Data

Evaluates revenues and output generated by the Costco Wholesale Corp. assets. Operating performance ratios describe the relationship between the Costco Wholesale Corp. level of operations and the assets needed to sustain operating activities.

• Short-term Activity Ratios (Summary)
• Inventory Turnover
• Receivables Turnover
• Payables Turnover
• Working Capital Turnover
• Average Inventory Processing Period
• Average Receivable Collection Period
• Operating Cycle
• Average Payables Payment Period
• Cash Conversion Cycle

Enterprise Value (EV)

Enterprise value is total company value (the market value of common equity, debt, and preferred equity) minus the value of cash and short-term investments.

• Current EV
• Historical EV

Capital Asset Pricing Model (CAPM)

CAPM is a theory concentrated with deriving the expected rates of return on risky assets based on the assets’ systematic risk levels. Systematic risk is the variability of returns that is due to macroeconomic factors that affect all risky assets. It cannot be eliminated by diversification.

• Rates of Return
• Variance and Covariance
• Systematic Risk (β) Estimation
• Expected Rate of Return

Common-Size Income Statement

Income statement components (revenues and expenses) shown as percentage of total sales.

Enterprise Value to EBITDA (EV/EBITDA)

To calculate EBITDA analysts start with net earnings. To that earnings number, interest, taxes, depreciation, and amortization are added. EBITDA as a pre-interest number is a flow to all providers of capital.

• Earnings before Interest, Tax, Depreciation and Amortization (EBITDA)
• EV to EBITDA Ratio, Current
• EV to EBITDA Ratio, Historical

Common Stock Valuation Ratios

Relative valuation technique determine the value of Costco Wholesale Corp. by comparing it to similar entities (like industry or sector) on the basis of several relative ratios that compare its stock price to relevant variables that affect the stock value, such as earnings, book value, and sales.

• Current Valuation Ratios
• Historical Valuation Ratios (Summary)
• Price to Earnings (P/E)
• Price to Operating Profit (P/OP)
• Price to Sales (P/S)
• Price to Book Value (P/BV)

Common Stock Valuation Ratios
Quarterly Data

Relative valuation technique determine the value of Costco Wholesale Corp. by comparing it to similar entities (like industry or sector) on the basis of several relative ratios that compare its stock price to relevant variables that affect the stock value, such as earnings, book value, and sales.

• Historical Valuation Ratios (Summary)
• Price to Earnings (P/E)
• Price to Operating Profit (P/OP)
• Price to Sales (P/S)
• Price to Book Value (P/BV)

Common-Size Balance Sheet: Liabilities and Stockholders’ Equity

Liabilities and stockholders’ equity components shown as percentage of total liabilities and stockholders’ equity.

Enterprise Value to FCFF (EV/FCFF)

Free cash flow to the firm is the cash flow available to the Costco Wholesale Corp. suppliers of capital after all operating expenses have been paid and necessary investments in working and fixed capital have been made.

• Free Cash Flow to The Firm (FCFF)
• Interest Paid, Net of Tax
• EV to FCFF Ratio, Current
• EV to FCFF Ratio, Historical

Analysis of Liquidity Ratios

Measures the adequacy of Costco Wholesale Corp. cash resources to meet its near-term cash obligations.

• Liquidity Ratios (Summary)
• Current Ratio
• Quick Ratio
• Cash Ratio