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Hey moderators, I have a small query regarding topic 5.
I have selected a company in a certain industry, their revenue growth in the past 3 years beats the industry, based on data available.
However when comparing with their competitor, their revenue growth exceeds them, so does the margin growth.
However, their margins still fall below the competitor drastically(which is the only possible benchmark). This is mainly because the competitor is a market leader already, and the company I’m selecting is only starting to gain the market leader’s market share.Any advice on whether I should proceed with this company, or start finding something else?
Hi,
I’m planning in submitting my research report in the May session and selected topic 5. I want to know when selecting a company would it be beneficial to select a listed entity in the UK or can I choose a listed entity in a country like Sri Lanka for the project? Would it be a case where the marker would be more comfortable to assessing a company from the UK or a more famous company like Amazon than from another company
TIA 🙂
You have presented quite an interesting scenario leeds627 and from the above it seems your company is a ‘small fish’ that has entered a ‘bigger pool’. However I think it is viable but would need a radically different approach, because as you have observed, the ratio analysis is not going to produce the ‘normal’ results – and in fact is going to present more anomalies. I would suggest therefore that you read up on the company strategies and future plans [usually laid out in the Chairman and CEO statements within the annual report] and get a feel for those to help explain its performance. Do a good application of Porter’s 5 as that should help you understand some of the strategies and its prospects. You could also take the more unusual route of doing some forecasting via regression analysis.
To be honest I think a company such as the one that you have set out above would probably make a much better subject company for Topic 18 – Marketing strategies than a what is predominantly a financial analysis topic as to achieve such a phenomenal revenue growth percentage it must be employing some excellent marketing strategies. The second part of a T18 brings in some financial and market share analysis and benchmarking against competitors – so might be worth considering
@ranganaherath: You may choose a company that operates in your own country but the primary consideration before embarking on Topic 4, 5 & 8 is the availability of sufficient information
Re-read the requirements: ‘You must justify the choice of organisation and justify why you consider the performance exceptionally strong.’
and in particular the statement from the Info Pack: ‘Successful research reports will demonstrate a clear understanding of the industry sector and its competitive pressures’ – this means a good application of Porter’s 5 as well as a PESTLE probably at the beginning to set the scene for how and why it has performed exceptionally well. You could then do the requisite ratio analysis [to include revenue growth, profit, liquidity and investor ratios] that relates back to these models when explaining its success and possibly bring in a SWOT at the end to tie it all together
My concern for you is the final topic requirement: ‘A comparison to another organisation, or to the industry sector averages, is required’ – who would you use as a comparator for Amazon for example???
Thank you for your response. It was very helpful. Like you’ve pointed out finding a comparison is the difficult part. 🙂
Hi @GillianM
Just a small question, for topic 5 it says that the company performing well shouldn’t be purely due to covid but most companies that have performed well during the past 3 years have been as a direct or indirect result of Covid. So in that case how do we decide on the company?
Also should the YOY performance be increasing for all three years because the company I have in mind has seen a drop in profitability ratios in the 2nd year before picking up massively in the 3rd year. Year one was a moderate one the increase is due to covid impact. Therefore would it be better to go with another company or is this good cause only 1 year out of the 3 has seen an exceptional performance
i have similar question but also can i choose a company which has negative profit margins?
Sorry guys but this is not a topic I mentor for (neither do I undertake Topic 4 or 8) so I cannot really advise on these topics unfortunately.
The best advice I can give is to look at the University mentoring website as there is a link there (and also in the latest Info Pack) to their YouTube channe where they have some videos giving more info on each topic.
In addition there have been some mentor webinars that have mostly focused on Topics 4, 5 &8 so if you get yourselves a decent mentor who registered for these webinars they should have the latest advice as some of these issues were discussed then
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