Comparative Analysis Of Tesco

2893 Words12 Pages

Contents

Introduction 3
Analysis of the share price behaviour 3
Financial structure and cost of capital 6
Conclusion 8
References 9
Annexes 10

Figure 1. Stock prices of Tesco PLS during 2009-2014 2
Figure 2. Rate of return on stocks of Tesco PLS during 2009-2014 3
Figure 3. Rate of returns on Tesco PLC and FTSE 100 Index 4
Figure 4. Risk-Return space for portfolios consisting different portions of Tesco's stocks and FTSE 100 index………………………………………………………………………. 5
Figure 5. Relationship between return on Tesco's stock and return on FTSE 100 Index: Characteristic line 6 Introduction

Founded in 1924, TESCO PLC is the biggest retailer chain company in the United Kingdom with expanding presence in other countries of the world. The company’s …show more content…

Due to Tesco’s being publicly traded and listed company at FTSE, it will enable us to conduct a comparative analysis of the company’s financial performance with the average industry performance for the reported period.
Figure 1. Stock prices of Tesco PLS during 2009-2014
As the graph above shows, the share price of Tesco during previous 60 months was quite volatile with the generally decreasing trend. Over the period of five years, Tesco’s share price dropped by more than 200 %, meaning that the company is underperforming considerably in comparison with previous years. Specifically, during the last months, Tesco’s share recorded the lowest prices over five years with the drop (from 303p in May 2014) to 186p in September 2014 thanks to recent accounting scandal with Tesco . Consequently, this volatility of stocks has a direct effect on the returns for these stocks …show more content…

Evidently, negative rate of return above signals decreasing share prices which in turn mean adverse profitability expectations towards the company. This is, again, probably due to the continuing ‘accounting scandal’ of Tesco which has already had negative impact on the reputation of the company on the eyes of investors. Turning to the riskiness of Tesco’s shares, standard deviation, traditional measure of historical volatility and risk, also reflects negative signs concerning the riskiness of Tesco’s assets, i.e., stocks. The standard deviation with the value of 6% calculated for the returns illustrated above reflects substantial volatility of these returns with respect to expected monthly return which is -0.96%. Even without calculating standard deviation, instability of Tesco’s stock prices during the given period can be observed from Figure 2 just

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