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Comparison Financial Statement of Cochlear Ltd

Autor:   •  March 3, 2019  •  Research Paper  •  3,401 Words (14 Pages)  •  21 Views

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Cochlear Limited

The effect of company announcement on their share price and the analysis of financial statement

M. Yasuraoka

Executive summary

The objectives of this report are to confirm the worth of accounting information when purchasing share prices in Australian company’s listed on the ASX and to provide the information for decision making to invest on Cochlear to investors through basic financial statement analysis.

 The report will analyze the impact of Cochlear’s announce, and two competitors share price trends in the same industry and general market index on their share price trends in order to determine actual effecting events on Cochlear’s share price trends.

As the result of above analysis, we concluded that profit announcement had an effect on Cochlear’s share price. Cochlear’s profit announcement was of a positive, hence the information brought a positive response from shareholders.  

 As the result of basic financial statement analysis, we found that Cochlear has a high profitability, a high assert efficiency and high financial soundness in their business in comparison with competitors in same industry. In addition, according to several markets report such as MarketsandMarkets research (2017) and Grand View research (2018), the hearing aids market which Cochlear belongs to will grow continuously for the next five to ten years. It is estimated CAGR 7.0% to 10.5%. Therefore, it is expected that Cochlear and other competitor in this industry will grow their business continuously.

However, current share price of Cochlear ($183 on March 23, 2018) is high level compared with average P/E Ratio in All Ordinaries. Therefore, we cannot recommend to buy Cochlear’s stock for short-term investment. However, their profitability and growth in business is a high level in comparison with other competitors and the outlook of hearing aids market is favorable. Therefore, Cochlear is recommended as a long-term investment.

Table of contents

1.0        Objectives        3

2.0        Overview of the Medical and Surgical Equipment Manufacturing industry, competitors and company        4

3.0        Impact of Announcement        6

4.0        Analysis of Actual stock market reaction and calculation of residual        7

5.0        Commentary on the Director’s Report        9

6.0        Analysis of the Income Statement        10

7.0        Analysis of the Balance sheet        12

8.0        Analysis of the Statement of Cash Flows        14

9.0        Analysis of five key ratios        15

ⅰ) Current ratio        15

ⅱ) Debt to Equity        15

ⅲ) Return of assets (ROA)        16

ⅳ) Profit ratio (EBIT margin)        17

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