Question

Find two companies, preferably in the same industry, that you like and perform a fundamental company analysis and determined which of the two companies that you would purchase and why based on the following financial ratios below. Please note that the answers may be in the negative or not applicable and that is ok also.

1. Current Ratio                                     (Liquidity Ratio)
2. Debt / Equity Ratio                            (Risk Analysis Ratio)
3. Gross Profit Margin                             (Operating Performance Ratio)
4. Return on Common Equity (ROE)          (Operating Performance Ratio)
5. Earnings Per Common Share (EPS)       (Value Ratio)
6. Price / Earnings Ratio (PE Ratio)          (Value Ratio)

Answer 1

Ans:

Two selected companies are - Intel and Nvidia (Sector - IT)

NVIDIA current assets is much better than Intel as NVIDIA has lower debt in balance sheet.

Debt / Equity ratio showing Intel has slightly higher long term debt than NVIDIA.

Gross margin of NVIDIA is slightly better than Intel because NVIDIA has lower cost of goods sold.

Return on Equity is better for Intel that means company utilizing it very capital efficient way.

EPS of Intel is better than NVIDIA that means Intel shareholders are getting higher earning per share than NVIDIA.

P/ E ration is very high for NVIDIA.

Basis on this i will choose Intel over NVIDIA because NVIDIA has very high valuation in according to p/e ratio and also EPS along with ROE are better than NVIDIA.

Note: Analysis based on annual report of both companies.