Question

Provide the current Valuation Ratios for the company United Parcel Service (UPS) and explain what they mean and what the number tells us. Also, why is this ratio important to the company? Compare these ratios to the industry financial ratios. Lastly, look at trends within United Parcel Service (UPS) company over time and explain if they are doing better, worse or holding steady, and how is the company doing and where can the company perform better?  

Please cite where the information comes from.

Answer 1

Hi,

Ratio definitions:

Price Earnings ratio is the ratio of company's current share price to its earnings per share. Price Earnings ratio is the ratio of company's current share price to its earnings per share. It gives us an idea of what the market is willing to pay for company's earnings

Price–sales ratio, P/S ratio, or PSR, is a valuation metric for stocks. It is calculated by dividing the company's market cap by the revenue in the most recent year; or, equivalently, divide the per-share stock priceby the per-share revenue.

The Price-to-cash-flow ratio is a stock valuation indicator that measures the value of a stock’s price to its cash flow per share. The ratio takes into consideration a stock’s operating cash flow (OCF) which adds non-cash earnings, such as depreciation and amortization, to net income.

Current Valuation Vs forward valuation:

Compared to Competitor data:

In General below are my observations about UPS:

• UPS has relatively high profit margins while operating with median asset turns.
• Market has relatively low growth expectations despite its relatively high returns.
• Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
• Return on assets currently and over the past five years suggest that it has relatively high operating returns.
• It has the financial and operating capacity to borrow quickly.