(a)Expected Monthly Return of the stock;
(b)Standard deviation of Monthly returns of the stock over the period of 5 years i.e. 01-11-13 to 01-11-18.
(c)Computation of Monthly return of FTSE 100 in which top 100 entities are embodied;
(d)Correlation of monthly return of the stock with that of FTSE 100 by considering the sample data of 5 years as stated above;
(e)Constructing Portfolio with different weight of the stock and computing the risk of the portfolio on the basis of the weight and accordingly computing the coefficient of variation to analyse the combination that compensates the most
(f)Computation of Beta of the stock by computing covariance of the stock with the FTSE100 and using the formula;
(g)Computation of Expected Return using Capital Asset Pricing Model;
(h)Computation of Price to Earnings Ratio for 31-12-2017 and 31-12-2016;
(i)Comment on the appropriateness of Capital Structure;
(j)Future Performance of the company
Expected Monthly Return of the stock;
The expected monthly return of the stock has been computed by extracting the data form the following Website (Anon., n.d.)
Post the above, the data has been used for the period of 5 years and the mean monthly return is computed on the basis of data extracted in the following manner:
Step 1: Subtraction of Data for next month with previous month to compute change;
Step 2: Division of Change with the data for previous Month
Step 3: Mean of the % change in data has been used to compute monthly return
The computation has been presented here-in-below:
|
Date |
Adj Close |
Net Share Price |
Change |
% Change |
|
01-11-2013 |
1,929.31 |
1,929.31 |
|
|
|
01-12-2013 |
2,040.83 |
2,040.83 |
111.52 |
5.78% |
|
01-01-2014 |
1,997.23 |
1,997.23 |
-43.6 |
-2.14% |
|
01-02-2014 |
1,968.85 |
1,968.85 |
-28.38 |
-1.42% |
|
01-03-2014 |
1,953.64 |
1,953.64 |
-15.21 |
-0.77% |
|
01-04-2014 |
2,045.90 |
2,045.90 |
92.26 |
4.72% |
|
01-05-2014 |
2,387.56 |
2,387.56 |
341.66 |
16.70% |
|
01-06-2014 |
2,454.47 |
2,454.47 |
66.91 |
2.80% |
|
01-07-2014 |
2,430.99 |
2,430.99 |
-23.48 |
-0.96% |
|
01-08-2014 |
2,329.11 |
2,329.11 |
-101.88 |
-4.19% |
|
01-09-2014 |
2,399.72 |
2,399.72 |
70.61 |
3.03% |
|
01-10-2014 |
2,389.64 |
2,389.64 |
-10.08 |
-0.42% |
|
01-11-2014 |
2,733.61 |
2,733.61 |
343.97 |
14.39% |
|
01-12-2014 |
2,617.61 |
2,617.61 |
-116 |
-4.24% |
|
01-01-2015 |
2,685.19 |
2,685.19 |
67.58 |
2.58% |
|
01-02-2015 |
2,673.08 |
2,673.08 |
-12.11 |
-0.45% |
|
01-03-2015 |
2,656.95 |
2,656.95 |
-16.13 |
-0.60% |
|
01-04-2015 |
2,828.43 |
2,828.43 |
171.48 |
6.45% |
|
01-05-2015 |
2,764.88 |
2,764.88 |
-63.55 |
-2.25% |
|
01-06-2015 |
2,588.35 |
2,588.35 |
-176.53 |
-6.38% |
|
01-07-2015 |
2,721.50 |
2,721.50 |
133.15 |
5.14% |
|
01-08-2015 |
2,477.39 |
2,477.39 |
-244.11 |
-8.97% |
|
01-09-2015 |
2,303.90 |
2,303.90 |
-173.49 |
-7.00% |
|
01-10-2015 |
2,623.66 |
2,623.66 |
319.76 |
13.88% |
|
01-11-2015 |
2,578.26 |
2,578.26 |
-45.4 |
-1.73% |
|
01-12-2015 |
2,681.15 |
2,681.15 |
102.89 |
3.99% |
|
01-01-2016 |
2,317.01 |
2,317.01 |
-364.14 |
-13.58% |
|
01-02-2016 |
2,748.74 |
2,748.74 |
431.73 |
18.63% |
|
01-03-2016 |
2,896.01 |
2,896.01 |
147.27 |
5.36% |
|
01-04-2016 |
2,752.77 |
2,752.77 |
-143.24 |
-4.95% |
|
01-05-2016 |
2,674.05 |
2,674.05 |
-78.72 |
-2.86% |
|
01-06-2016 |
2,766.51 |
2,766.51 |
92.46 |
3.46% |
|
01-07-2016 |
3,036.82 |
3,036.82 |
270.31 |
9.77% |
|
01-08-2016 |
3,277.00 |
3,277.00 |
240.18 |
7.91% |
|
01-09-2016 |
3,195.60 |
3,195.60 |
-81.4 |
-2.48% |
|
01-10-2016 |
3,190.57 |
3,190.57 |
-5.03 |
-0.16% |
|
01-11-2016 |
3,297.09 |
3,297.09 |
106.52 |
3.34% |
|
01-12-2016 |
3,655.85 |
3,655.85 |
358.76 |
10.88% |
|
01-01-2017 |
3,698.05 |
3,698.05 |
42.2 |
1.15% |
|
01-02-2017 |
3,814.62 |
3,814.62 |
116.57 |
3.15% |
|
01-03-2017 |
3,927.17 |
3,927.17 |
112.55 |
2.95% |
|
01-04-2017 |
4,116.09 |
4,116.09 |
188.92 |
4.81% |
|
01-05-2017 |
4,373.00 |
4,373.00 |
256.91 |
6.24% |
|
01-06-2017 |
4,267.00 |
4,267.00 |
-106 |
-2.42% |
|
01-07-2017 |
4,291.00 |
4,291.00 |
24 |
0.56% |
|
01-08-2017 |
3,856.00 |
3,856.00 |
-435 |
-10.14% |
|
01-09-2017 |
3,948.00 |
3,948.00 |
92 |
2.39% |
|
01-10-2017 |
4,172.00 |
4,172.00 |
224 |
5.67% |
|
01-11-2017 |
4,349.00 |
4,349.00 |
177 |
4.24% |
|
01-12-2017 |
4,719.00 |
4,719.00 |
370 |
8.51% |
|
01-01-2018 |
4,712.00 |
4,712.00 |
-7 |
-0.15% |
|
01-02-2018 |
4,699.00 |
4,699.00 |
-13 |
-0.28% |
|
01-03-2018 |
4,268.00 |
4,268.00 |
-431 |
-9.17% |
|
01-04-2018 |
4,589.00 |
4,589.00 |
321 |
7.52% |
|
01-05-2018 |
4,814.00 |
4,814.00 |
225 |
4.90% |
|
01-06-2018 |
4,720.00 |
4,720.00 |
-94 |
-1.95% |
|
01-07-2018 |
4,707.00 |
4,707.00 |
-13 |
-0.28% |
|
01-08-2018 |
4,755.00 |
4,755.00 |
48 |
1.02% |
|
01-09-2018 |
4,780.00 |
4,780.00 |
25 |
0.53% |
|
01-10-2018 |
4,110.00 |
4,110.00 |
-670 |
-14.02% |
|
01-11-2018 |
4,182.00 |
4,182.00 |
72 |
1.75% |
|
Mean Return |
1.5% |
|||
Standard deviation of Monthly returns of the stock over the period of 5 years i.e. 01-11-13 to 01-11-18.
The Standard Deviation of the stock has been computed by extracting the data form the following Website
https://uk.finance.yahoo.com/quote/IHG.L/history?p=IHG.L
Post the above, the data has been used for the period of 5 years and the standard deviation is computed on the basis of data extracted by using the formula for STDEV.S(Cell Range)
|
Date |
Adj Close |
Net Share Price |
Change |
% Change |
|
01-11-2013 |
1,929.31 |
1,929.31 |
|
|
|
01-12-2013 |
2,040.83 |
2,040.83 |
111.52 |
5.78% |
|
01-01-2014 |
1,997.23 |
1,997.23 |
-43.6 |
-2.14% |
|
01-02-2014 |
1,968.85 |
1,968.85 |
-28.38 |
-1.42% |
|
01-03-2014 |
1,953.64 |
1,953.64 |
-15.21 |
-0.77% |
|
01-04-2014 |
2,045.90 |
2,045.90 |
92.26 |
4.72% |
|
01-05-2014 |
2,387.56 |
2,387.56 |
341.66 |
16.70% |
|
01-06-2014 |
2,454.47 |
2,454.47 |
66.91 |
2.80% |
|
01-07-2014 |
2,430.99 |
2,430.99 |
-23.48 |
-0.96% |
|
01-08-2014 |
2,329.11 |
2,329.11 |
-101.88 |
-4.19% |
|
01-09-2014 |
2,399.72 |
2,399.72 |
70.61 |
3.03% |
|
01-10-2014 |
2,389.64 |
2,389.64 |
-10.08 |
-0.42% |
|
01-11-2014 |
2,733.61 |
2,733.61 |
343.97 |
14.39% |
|
01-12-2014 |
2,617.61 |
2,617.61 |
-116 |
-4.24% |
|
01-01-2015 |
2,685.19 |
2,685.19 |
67.58 |
2.58% |
|
01-02-2015 |
2,673.08 |
2,673.08 |
-12.11 |
-0.45% |
|
01-03-2015 |
2,656.95 |
2,656.95 |
-16.13 |
-0.60% |
|
01-04-2015 |
2,828.43 |
2,828.43 |
171.48 |
6.45% |
|
01-05-2015 |
2,764.88 |
2,764.88 |
-63.55 |
-2.25% |
|
01-06-2015 |
2,588.35 |
2,588.35 |
-176.53 |
-6.38% |
|
01-07-2015 |
2,721.50 |
2,721.50 |
133.15 |
5.14% |
|
01-08-2015 |
2,477.39 |
2,477.39 |
-244.11 |
-8.97% |
|
01-09-2015 |
2,303.90 |
2,303.90 |
-173.49 |
-7.00% |
|
01-10-2015 |
2,623.66 |
2,623.66 |
319.76 |
13.88% |
|
01-11-2015 |
2,578.26 |
2,578.26 |
-45.4 |
-1.73% |
|
01-12-2015 |
2,681.15 |
2,681.15 |
102.89 |
3.99% |
|
01-01-2016 |
2,317.01 |
2,317.01 |
-364.14 |
-13.58% |
|
01-02-2016 |
2,748.74 |
2,748.74 |
431.73 |
18.63% |
|
01-03-2016 |
2,896.01 |
2,896.01 |
147.27 |
5.36% |
|
01-04-2016 |
2,752.77 |
2,752.77 |
-143.24 |
-4.95% |
|
01-05-2016 |
2,674.05 |
2,674.05 |
-78.72 |
-2.86% |
|
01-06-2016 |
2,766.51 |
2,766.51 |
92.46 |
3.46% |
|
01-07-2016 |
3,036.82 |
3,036.82 |
270.31 |
9.77% |
|
01-08-2016 |
3,277.00 |
3,277.00 |
240.18 |
7.91% |
|
01-09-2016 |
3,195.60 |
3,195.60 |
-81.4 |
-2.48% |
|
01-10-2016 |
3,190.57 |
3,190.57 |
-5.03 |
-0.16% |
|
01-11-2016 |
3,297.09 |
3,297.09 |
106.52 |
3.34% |
|
01-12-2016 |
3,655.85 |
3,655.85 |
358.76 |
10.88% |
|
01-01-2017 |
3,698.05 |
3,698.05 |
42.2 |
1.15% |
|
01-02-2017 |
3,814.62 |
3,814.62 |
116.57 |
3.15% |
|
01-03-2017 |
3,927.17 |
3,927.17 |
112.55 |
2.95% |
|
01-04-2017 |
4,116.09 |
4,116.09 |
188.92 |
4.81% |
|
01-05-2017 |
4,373.00 |
4,373.00 |
256.91 |
6.24% |
|
01-06-2017 |
4,267.00 |
4,267.00 |
-106 |
-2.42% |
|
01-07-2017 |
4,291.00 |
4,291.00 |
24 |
0.56% |
|
01-08-2017 |
3,856.00 |
3,856.00 |
-435 |
-10.14% |
|
01-09-2017 |
3,948.00 |
3,948.00 |
92 |
2.39% |
|
01-10-2017 |
4,172.00 |
4,172.00 |
224 |
5.67% |
|
01-11-2017 |
4,349.00 |
4,349.00 |
177 |
4.24% |
|
01-12-2017 |
4,719.00 |
4,719.00 |
370 |
8.51% |
|
01-01-2018 |
4,712.00 |
4,712.00 |
-7 |
-0.15% |
|
01-02-2018 |
4,699.00 |
4,699.00 |
-13 |
-0.28% |
|
01-03-2018 |
4,268.00 |
4,268.00 |
-431 |
-9.17% |
|
01-04-2018 |
4,589.00 |
4,589.00 |
321 |
7.52% |
|
01-05-2018 |
4,814.00 |
4,814.00 |
225 |
4.90% |
|
01-06-2018 |
4,720.00 |
4,720.00 |
-94 |
-1.95% |
|
01-07-2018 |
4,707.00 |
4,707.00 |
-13 |
-0.28% |
|
01-08-2018 |
4,755.00 |
4,755.00 |
48 |
1.02% |
|
01-09-2018 |
4,780.00 |
4,780.00 |
25 |
0.53% |
|
01-10-2018 |
4,110.00 |
4,110.00 |
-670 |
-14.02% |
|
01-11-2018 |
4,182.00 |
4,182.00 |
72 |
1.75% |
|
Mean Return |
1.5% |
|||
|
Standard Deviation |
6.5% |
|||
(yahoo finance, 2018)
Computation of Monthly return of FTSE 100 in which top 100 entities are embodied
The expected monthly return of the FTSE 100 has been computed by extracting the data form the following Website
https://in.investing.com/indices/uk-100-historical-data
Post the above, the data has been used for the period of 5 years and the mean monthly return is computed on the basis of data extracted in the following manner:
Step 1: Subtraction of Data for next month with previous month to compute change;
Step 2: Division of Change with the data for previous Month
Step 3: Mean of the % change in data has been used to compute monthly return
The computation has been presented here-in-below:
|
Date |
FTSE Index |
Change |
% Change in FTSE |
|
01-11-2013 |
6,650.57 |
|
|
|
01-12-2013 |
6,749.09 |
98.52 |
1.48% |
|
01-01-2014 |
6,510.44 |
-238.65 |
-3.54% |
|
01-02-2014 |
6,809.70 |
299.26 |
4.60% |
|
01-03-2014 |
6,598.37 |
-211.33 |
-3.10% |
|
01-04-2014 |
6,780.03 |
181.66 |
2.75% |
|
01-05-2014 |
6,844.51 |
64.48 |
0.95% |
|
01-06-2014 |
6,743.94 |
-100.57 |
-1.47% |
|
01-07-2014 |
6,730.11 |
-13.83 |
-0.21% |
|
01-08-2014 |
6,819.75 |
89.64 |
1.33% |
|
01-09-2014 |
6,622.72 |
-197.03 |
-2.89% |
|
01-10-2014 |
6,546.47 |
-76.25 |
-1.15% |
|
01-11-2014 |
6,722.62 |
176.15 |
2.69% |
|
01-12-2014 |
6,566.09 |
-156.53 |
-2.33% |
|
01-01-2015 |
6,749.40 |
183.31 |
2.79% |
|
01-02-2015 |
6,946.66 |
197.26 |
2.92% |
|
01-03-2015 |
6,773.04 |
-173.62 |
-2.50% |
|
01-04-2015 |
6,960.63 |
187.59 |
2.77% |
|
01-05-2015 |
6,984.43 |
23.8 |
0.34% |
|
01-06-2015 |
6,520.98 |
-463.45 |
-6.64% |
|
01-07-2015 |
6,696.28 |
175.3 |
2.69% |
|
01-08-2015 |
6,247.94 |
-448.34 |
-6.70% |
|
01-09-2015 |
6,061.61 |
-186.33 |
-2.98% |
|
01-10-2015 |
6,361.09 |
299.48 |
4.94% |
|
01-11-2015 |
6,356.09 |
-5 |
-0.08% |
|
01-12-2015 |
6,242.32 |
-113.77 |
-1.79% |
|
01-01-2016 |
6,083.79 |
-158.53 |
-2.54% |
|
01-02-2016 |
6,097.09 |
13.3 |
0.22% |
|
01-03-2016 |
6,174.90 |
77.81 |
1.28% |
|
01-04-2016 |
6,241.89 |
66.99 |
1.08% |
|
01-05-2016 |
6,230.79 |
-11.1 |
-0.18% |
|
01-06-2016 |
6,504.33 |
273.54 |
4.39% |
|
01-07-2016 |
6,724.43 |
220.1 |
3.38% |
|
01-08-2016 |
6,781.51 |
57.08 |
0.85% |
|
01-09-2016 |
6,899.33 |
117.82 |
1.74% |
|
01-10-2016 |
6,954.22 |
54.89 |
0.80% |
|
01-11-2016 |
6,783.79 |
-170.43 |
-2.45% |
|
01-12-2016 |
7,142.83 |
359.04 |
5.29% |
|
01-01-2017 |
7,099.15 |
-43.68 |
-0.61% |
|
01-02-2017 |
7,263.44 |
164.29 |
2.31% |
|
01-03-2017 |
7,322.92 |
59.48 |
0.82% |
|
01-04-2017 |
7,203.94 |
-118.98 |
-1.62% |
|
01-05-2017 |
7,519.95 |
316.01 |
4.39% |
|
01-06-2017 |
7,312.72 |
-207.23 |
-2.76% |
|
01-07-2017 |
7,372.00 |
59.28 |
0.81% |
|
01-08-2017 |
7,430.62 |
58.62 |
0.80% |
|
01-09-2017 |
7,372.76 |
-57.86 |
-0.78% |
|
01-10-2017 |
7,493.08 |
120.32 |
1.63% |
|
01-11-2017 |
7,326.67 |
-166.41 |
-2.22% |
|
01-12-2017 |
7,687.77 |
361.1 |
4.93% |
|
01-01-2018 |
7,533.55 |
-154.22 |
-2.01% |
|
01-02-2018 |
7,231.91 |
-301.64 |
-4.00% |
|
01-03-2018 |
7,056.61 |
-175.3 |
-2.42% |
|
01-04-2018 |
7,509.30 |
452.69 |
6.42% |
|
01-05-2018 |
7,678.20 |
168.9 |
2.25% |
|
01-06-2018 |
7,636.93 |
-41.27 |
-0.54% |
|
01-07-2018 |
7,748.76 |
111.83 |
1.46% |
|
01-08-2018 |
7,432.42 |
-316.34 |
-4.08% |
|
01-09-2018 |
7,510.20 |
77.78 |
1.05% |
|
01-10-2018 |
7,128.10 |
-382.1 |
-5.09% |
|
01-11-2018 |
7,114.66 |
-13.44 |
-0.19% |
|
Mean Return |
|
|
0.155% |
(Fusion Media Limited., 2018)
Standard deviation of Monthly returns of FTSE 100 the period of 5 years i.e. 01-11-13 to 01-11-18.
The Standard Deviation of the FTSE 100 has been computed by extracting the data form the following Website
Post the above, the data has been used for the period of 5 years and the standard deviation is computed on the basis of data extracted by using the formula for STDEV.S(Cell Range)
|
Date |
FTSE Index |
Change |
% Change in FTSE |
|
01-11-2013 |
6,650.57 |
|
|
|
01-12-2013 |
6,749.09 |
98.52 |
1.48% |
|
01-01-2014 |
6,510.44 |
-238.65 |
-3.54% |
|
01-02-2014 |
6,809.70 |
299.26 |
4.60% |
|
01-03-2014 |
6,598.37 |
-211.33 |
-3.10% |
|
01-04-2014 |
6,780.03 |
181.66 |
2.75% |
|
01-05-2014 |
6,844.51 |
64.48 |
0.95% |
|
01-06-2014 |
6,743.94 |
-100.57 |
-1.47% |
|
01-07-2014 |
6,730.11 |
-13.83 |
-0.21% |
|
01-08-2014 |
6,819.75 |
89.64 |
1.33% |
|
01-09-2014 |
6,622.72 |
-197.03 |
-2.89% |
|
01-10-2014 |
6,546.47 |
-76.25 |
-1.15% |
|
01-11-2014 |
6,722.62 |
176.15 |
2.69% |
|
01-12-2014 |
6,566.09 |
-156.53 |
-2.33% |
|
01-01-2015 |
6,749.40 |
183.31 |
2.79% |
|
01-02-2015 |
6,946.66 |
197.26 |
2.92% |
|
01-03-2015 |
6,773.04 |
-173.62 |
-2.50% |
|
01-04-2015 |
6,960.63 |
187.59 |
2.77% |
|
01-05-2015 |
6,984.43 |
23.8 |
0.34% |
|
01-06-2015 |
6,520.98 |
-463.45 |
-6.64% |
|
01-07-2015 |
6,696.28 |
175.3 |
2.69% |
|
01-08-2015 |
6,247.94 |
-448.34 |
-6.70% |
|
01-09-2015 |
6,061.61 |
-186.33 |
-2.98% |
|
01-10-2015 |
6,361.09 |
299.48 |
4.94% |
|
01-11-2015 |
6,356.09 |
-5 |
-0.08% |
|
01-12-2015 |
6,242.32 |
-113.77 |
-1.79% |
|
01-01-2016 |
6,083.79 |
-158.53 |
-2.54% |
|
01-02-2016 |
6,097.09 |
13.3 |
0.22% |
|
01-03-2016 |
6,174.90 |
77.81 |
1.28% |
|
01-04-2016 |
6,241.89 |
66.99 |
1.08% |
|
01-05-2016 |
6,230.79 |
-11.1 |
-0.18% |
|
01-06-2016 |
6,504.33 |
273.54 |
4.39% |
|
01-07-2016 |
6,724.43 |
220.1 |
3.38% |
|
01-08-2016 |
6,781.51 |
57.08 |
0.85% |
|
01-09-2016 |
6,899.33 |
117.82 |
1.74% |
|
01-10-2016 |
6,954.22 |
54.89 |
0.80% |
|
01-11-2016 |
6,783.79 |
-170.43 |
-2.45% |
|
01-12-2016 |
7,142.83 |
359.04 |
5.29% |
|
01-01-2017 |
7,099.15 |
-43.68 |
-0.61% |
|
01-02-2017 |
7,263.44 |
164.29 |
2.31% |
|
01-03-2017 |
7,322.92 |
59.48 |
0.82% |
|
01-04-2017 |
7,203.94 |
-118.98 |
-1.62% |
|
01-05-2017 |
7,519.95 |
316.01 |
4.39% |
|
01-06-2017 |
7,312.72 |
-207.23 |
-2.76% |
|
01-07-2017 |
7,372.00 |
59.28 |
0.81% |
|
01-08-2017 |
7,430.62 |
58.62 |
0.80% |
|
01-09-2017 |
7,372.76 |
-57.86 |
-0.78% |
|
01-10-2017 |
7,493.08 |
120.32 |
1.63% |
|
01-11-2017 |
7,326.67 |
-166.41 |
-2.22% |
|
01-12-2017 |
7,687.77 |
361.1 |
4.93% |
|
01-01-2018 |
7,533.55 |
-154.22 |
-2.01% |
|
01-02-2018 |
7,231.91 |
-301.64 |
-4.00% |
|
01-03-2018 |
7,056.61 |
-175.3 |
-2.42% |
|
01-04-2018 |
7,509.30 |
452.69 |
6.42% |
|
01-05-2018 |
7,678.20 |
168.9 |
2.25% |
|
01-06-2018 |
7,636.93 |
-41.27 |
-0.54% |
|
01-07-2018 |
7,748.76 |
111.83 |
1.46% |
|
01-08-2018 |
7,432.42 |
-316.34 |
-4.08% |
|
01-09-2018 |
7,510.20 |
77.78 |
1.05% |
|
01-10-2018 |
7,128.10 |
-382.1 |
-5.09% |
|
01-11-2018 |
7,114.66 |
-13.44 |
-0.19% |
|
Mean Return |
|
|
0.155% |
|
Standard Deviation |
|
|
2.9% |
Correlation of monthly return of the stock with that of FTSE 100 by considering the sample data of 5 years as stated above
The Correlation has been computed based on the data and using the following formula in excel CORREL( range 1, range 2).
The computation has been provided here-in-below:
|
Date |
Adj Close |
Net Share Price |
Change |
% Change |
FTSE Index |
Change |
% Change in FTSE |
|
01-11-2013 |
1,929.31 |
1,929.31 |
|
|
6,650.57 |
|
|
|
01-12-2013 |
2,040.83 |
2,040.83 |
111.52 |
5.78% |
6,749.09 |
98.52 |
1.48% |
|
01-01-2014 |
1,997.23 |
1,997.23 |
-43.6 |
-2.14% |
6,510.44 |
-238.65 |
-3.54% |
|
01-02-2014 |
1,968.85 |
1,968.85 |
-28.38 |
-1.42% |
6,809.70 |
299.26 |
4.60% |
|
01-03-2014 |
1,953.64 |
1,953.64 |
-15.21 |
-0.77% |
6,598.37 |
-211.33 |
-3.10% |
|
01-04-2014 |
2,045.90 |
2,045.90 |
92.26 |
4.72% |
6,780.03 |
181.66 |
2.75% |
|
01-05-2014 |
2,387.56 |
2,387.56 |
341.66 |
16.70% |
6,844.51 |
64.48 |
0.95% |
|
01-06-2014 |
2,454.47 |
2,454.47 |
66.91 |
2.80% |
6,743.94 |
-100.57 |
-1.47% |
|
01-07-2014 |
2,430.99 |
2,430.99 |
-23.48 |
-0.96% |
6,730.11 |
-13.83 |
-0.21% |
|
01-08-2014 |
2,329.11 |
2,329.11 |
-101.88 |
-4.19% |
6,819.75 |
89.64 |
1.33% |
|
01-09-2014 |
2,399.72 |
2,399.72 |
70.61 |
3.03% |
6,622.72 |
-197.03 |
-2.89% |
|
01-10-2014 |
2,389.64 |
2,389.64 |
-10.08 |
-0.42% |
6,546.47 |
-76.25 |
-1.15% |
|
01-11-2014 |
2,733.61 |
2,733.61 |
343.97 |
14.39% |
6,722.62 |
176.15 |
2.69% |
|
01-12-2014 |
2,617.61 |
2,617.61 |
-116 |
-4.24% |
6,566.09 |
-156.53 |
-2.33% |
|
01-01-2015 |
2,685.19 |
2,685.19 |
67.58 |
2.58% |
6,749.40 |
183.31 |
2.79% |
|
01-02-2015 |
2,673.08 |
2,673.08 |
-12.11 |
-0.45% |
6,946.66 |
197.26 |
2.92% |
|
01-03-2015 |
2,656.95 |
2,656.95 |
-16.13 |
-0.60% |
6,773.04 |
-173.62 |
-2.50% |
|
01-04-2015 |
2,828.43 |
2,828.43 |
171.48 |
6.45% |
6,960.63 |
187.59 |
2.77% |
|
01-05-2015 |
2,764.88 |
2,764.88 |
-63.55 |
-2.25% |
6,984.43 |
23.8 |
0.34% |
|
01-06-2015 |
2,588.35 |
2,588.35 |
-176.53 |
-6.38% |
6,520.98 |
-463.45 |
-6.64% |
|
01-07-2015 |
2,721.50 |
2,721.50 |
133.15 |
5.14% |
6,696.28 |
175.3 |
2.69% |
|
01-08-2015 |
2,477.39 |
2,477.39 |
-244.11 |
-8.97% |
6,247.94 |
-448.34 |
-6.70% |
|
01-09-2015 |
2,303.90 |
2,303.90 |
-173.49 |
-7.00% |
6,061.61 |
-186.33 |
-2.98% |
|
01-10-2015 |
2,623.66 |
2,623.66 |
319.76 |
13.88% |
6,361.09 |
299.48 |
4.94% |
|
01-11-2015 |
2,578.26 |
2,578.26 |
-45.4 |
-1.73% |
6,356.09 |
-5 |
-0.08% |
|
01-12-2015 |
2,681.15 |
2,681.15 |
102.89 |
3.99% |
6,242.32 |
-113.77 |
-1.79% |
|
01-01-2016 |
2,317.01 |
2,317.01 |
-364.14 |
-13.58% |
6,083.79 |
-158.53 |
-2.54% |
|
01-02-2016 |
2,748.74 |
2,748.74 |
431.73 |
18.63% |
6,097.09 |
13.3 |
0.22% |
|
01-03-2016 |
2,896.01 |
2,896.01 |
147.27 |
5.36% |
6,174.90 |
77.81 |
1.28% |
|
01-04-2016 |
2,752.77 |
2,752.77 |
-143.24 |
-4.95% |
6,241.89 |
66.99 |
1.08% |
|
01-05-2016 |
2,674.05 |
2,674.05 |
-78.72 |
-2.86% |
6,230.79 |
-11.1 |
-0.18% |
|
01-06-2016 |
2,766.51 |
2,766.51 |
92.46 |
3.46% |
6,504.33 |
273.54 |
4.39% |
|
01-07-2016 |
3,036.82 |
3,036.82 |
270.31 |
9.77% |
6,724.43 |
220.1 |
3.38% |
|
01-08-2016 |
3,277.00 |
3,277.00 |
240.18 |
7.91% |
6,781.51 |
57.08 |
0.85% |
|
01-09-2016 |
3,195.60 |
3,195.60 |
-81.4 |
-2.48% |
6,899.33 |
117.82 |
1.74% |
|
01-10-2016 |
3,190.57 |
3,190.57 |
-5.03 |
-0.16% |
6,954.22 |
54.89 |
0.80% |
|
01-11-2016 |
3,297.09 |
3,297.09 |
106.52 |
3.34% |
6,783.79 |
-170.43 |
-2.45% |
|
01-12-2016 |
3,655.85 |
3,655.85 |
358.76 |
10.88% |
7,142.83 |
359.04 |
5.29% |
|
01-01-2017 |
3,698.05 |
3,698.05 |
42.2 |
1.15% |
7,099.15 |
-43.68 |
-0.61% |
|
01-02-2017 |
3,814.62 |
3,814.62 |
116.57 |
3.15% |
7,263.44 |
164.29 |
2.31% |
|
01-03-2017 |
3,927.17 |
3,927.17 |
112.55 |
2.95% |
7,322.92 |
59.48 |
0.82% |
|
01-04-2017 |
4,116.09 |
4,116.09 |
188.92 |
4.81% |
7,203.94 |
-118.98 |
-1.62% |
|
01-05-2017 |
4,373.00 |
4,373.00 |
256.91 |
6.24% |
7,519.95 |
316.01 |
4.39% |
|
01-06-2017 |
4,267.00 |
4,267.00 |
-106 |
-2.42% |
7,312.72 |
-207.23 |
-2.76% |
|
01-07-2017 |
4,291.00 |
4,291.00 |
24 |
0.56% |
7,372.00 |
59.28 |
0.81% |
|
01-08-2017 |
3,856.00 |
3,856.00 |
-435 |
-10.14% |
7,430.62 |
58.62 |
0.80% |
|
01-09-2017 |
3,948.00 |
3,948.00 |
92 |
2.39% |
7,372.76 |
-57.86 |
-0.78% |
|
01-10-2017 |
4,172.00 |
4,172.00 |
224 |
5.67% |
7,493.08 |
120.32 |
1.63% |
|
01-11-2017 |
4,349.00 |
4,349.00 |
177 |
4.24% |
7,326.67 |
-166.41 |
-2.22% |
|
01-12-2017 |
4,719.00 |
4,719.00 |
370 |
8.51% |
7,687.77 |
361.1 |
4.93% |
|
01-01-2018 |
4,712.00 |
4,712.00 |
-7 |
-0.15% |
7,533.55 |
-154.22 |
-2.01% |
|
01-02-2018 |
4,699.00 |
4,699.00 |
-13 |
-0.28% |
7,231.91 |
-301.64 |
-4.00% |
|
01-03-2018 |
4,268.00 |
4,268.00 |
-431 |
-9.17% |
7,056.61 |
-175.3 |
-2.42% |
|
01-04-2018 |
4,589.00 |
4,589.00 |
321 |
7.52% |
7,509.30 |
452.69 |
6.42% |
|
01-05-2018 |
4,814.00 |
4,814.00 |
225 |
4.90% |
7,678.20 |
168.9 |
2.25% |
|
01-06-2018 |
4,720.00 |
4,720.00 |
-94 |
-1.95% |
7,636.93 |
-41.27 |
-0.54% |
|
01-07-2018 |
4,707.00 |
4,707.00 |
-13 |
-0.28% |
7,748.76 |
111.83 |
1.46% |
|
01-08-2018 |
4,755.00 |
4,755.00 |
48 |
1.02% |
7,432.42 |
-316.34 |
-4.08% |
|
01-09-2018 |
4,780.00 |
4,780.00 |
25 |
0.53% |
7,510.20 |
77.78 |
1.05% |
|
01-10-2018 |
4,110.00 |
4,110.00 |
-670 |
-14.02% |
7,128.10 |
-382.1 |
-5.09% |
|
01-11-2018 |
4,182.00 |
4,182.00 |
72 |
1.75% |
7,114.66 |
-13.44 |
-0.19% |
|
Mean Return |
1.5% |
|
|
0.155% |
|||
|
Standard Deviation |
6.5% |
|
|
2.9% |
|||
|
Correlation |
0.565828185 |
||||||
The same symbolise a positive correlation and cannot be used as a hedging instrument. Further there is a strong affinity between the two data.
Constructing Portfolio with different weight of the stock and computing the risk of the portfolio on the basis of the weight and accordingly computing the coefficient of variation to analyse the combination that compensates the most
The graph for the risk return space has been presented here-in-below:
The computation of risk and return with different weight of stock ranging from 0.1 to 0.9 and correspondingly the weight of FTSE 100 in the portfolio 0.9 to 0.1. The computation of the risk, return and coefficient of variation of portfolio has been presented here-in-below:
|
SL No |
Particulars |
Weight |
Return |
Weight |
Return |
Weight |
Return |
|
1 |
Stock |
0.1 |
0.15% |
0.2 |
0.30% |
0.3 |
0.45% |
|
2 |
FTSE |
0.9 |
0.14% |
0.8 |
0.12% |
0.7 |
0.11% |
|
Total Return |
0.29% |
|
0.42% |
|
0.56% |
||
|
Risk |
3.06% |
|
3.27% |
|
3.55% |
||
|
Coefficient of Variation |
10.55 |
|
7.70 |
|
6.34 |
||
|
SL No |
Particulars |
Weight |
Return |
Weight |
Return |
Weight |
Return |
|
1 |
Stock |
0.4 |
0.60% |
0.5 |
0.75% |
0.6 |
0.90% |
|
2 |
FTSE |
0.6 |
0.09% |
0.5 |
0.08% |
0.4 |
0.06% |
|
Total Return |
|
0.69% |
|
0.83% |
|
0.96% |
|
|
Risk |
|
3.89% |
|
4.27% |
|
4.68% |
|
|
Coefficient of Variation |
|
5.60 |
|
5.15 |
|
4.86 |
|
|
SL No |
Particulars |
Weight |
Return |
Weight |
Return |
Weight |
Return |
|
1 |
Stock |
0.7 |
1.05% |
0.8 |
1.20% |
0.9 |
1.35% |
|
2 |
FTSE |
0.3 |
0.05% |
0.2 |
0.03% |
0.1 |
0.02% |
|
Total Return |
|
1.10% |
|
1.23% |
|
1.37% |
|
|
Risk |
|
5.12% |
|
5.58% |
|
6.05% |
|
|
Coefficient of Variation |
|
4.66 |
|
4.52 |
|
4.42 |
|
On the basis of above, it can be seen that the coefficient of Variation is highest for weight 0.1 of stock and 0.9 of FTSE-100.
Computation of Beta of the stock by computing covariance of the stock with the FTSE100 and using the formula
The Beta of the stock measures the sensitivity of the stock represents the sensitivity of the stock to the market symbolising increase or decrease in the value of stock compared to increase/ decrease increase in the value of Market by Sterling 1.
The computation has been done by computation of Covariance and using the following formula:
The computation has been presented here-in-below:
|
Correlation |
0.565828185 |
|
Covariance |
0.001084523 |
|
Beta of Stock |
1.259222077 |
Computation of Expected Return using Capital Asset Pricing Model
The Capital Asset Pricing Model is an additive Model and is used for computation of Expected return of the stock on the basis of systematic risk of the stock. The model is one of the simplest and most common model representing the expectation on the basis of risk undertaken by the company. The formula for computation of Expected Return using Capital Asset Pricing Model is presented here-in-below:
DateAdj Close
Dividend
Net Share Price
Change
% Change
FTSE Index
Change
% Change in FTSE
UK 10 year Gilt
Change
% Change
|
01-11-2013 |
1,929.31 |
|
1,929.31 |
|
|
6,650.57 |
|
|
2.77 |
|
|
|
01-12-2013 |
2,040.83 |
|
2,040.83 |
111.52 |
5.78% |
6,749.09 |
98.52 |
1.48% |
3.032 |
0.262 |
9.46% |
|
01-01-2014 |
1,997.23 |
|
1,997.23 |
-43.6 |
-2.14% |
6,510.44 |
-238.65 |
-3.54% |
2.711 |
-0.321 |
-10.59% |
|
01-02-2014 |
1,968.85 |
|
1,968.85 |
-28.38 |
-1.42% |
6,809.70 |
299.26 |
4.60% |
2.723 |
0.012 |
0.44% |
|
01-03-2014 |
1,953.64 |
0.47 |
1,953.64 |
-15.21 |
-0.77% |
6,598.37 |
-211.33 |
-3.10% |
2.739 |
0.016 |
0.59% |
|
01-04-2014 |
2,045.90 |
|
2,045.90 |
92.26 |
4.72% |
6,780.03 |
181.66 |
2.75% |
2.669 |
-0.07 |
-2.56% |
|
01-05-2014 |
2,387.56 |
|
2,387.56 |
341.66 |
16.70% |
6,844.51 |
64.48 |
0.95% |
2.567 |
-0.102 |
-3.82% |
|
01-06-2014 |
2,454.47 |
|
2,454.47 |
66.91 |
2.80% |
6,743.94 |
-100.57 |
-1.47% |
2.671 |
0.104 |
4.05% |
|
01-07-2014 |
2,430.99 |
|
2,430.99 |
-23.48 |
-0.96% |
6,730.11 |
-13.83 |
-0.21% |
2.616 |
-0.055 |
-2.06% |
|
01-08-2014 |
2,329.11 |
0.25 |
2,329.11 |
-101.88 |
-4.19% |
6,819.75 |
89.64 |
1.33% |
2.369 |
-0.247 |
-9.44% |
|
01-09-2014 |
2,399.72 |
|
2,399.72 |
70.61 |
3.03% |
6,622.72 |
-197.03 |
-2.89% |
2.426 |
0.057 |
2.41% |
|
01-10-2014 |
2,389.64 |
|
2,389.64 |
-10.08 |
-0.42% |
6,546.47 |
-76.25 |
-1.15% |
2.25 |
-0.176 |
-7.25% |
|
01-11-2014 |
2,733.61 |
|
2,733.61 |
343.97 |
14.39% |
6,722.62 |
176.15 |
2.69% |
1.927 |
-0.323 |
-14.36% |
|
01-12-2014 |
2,617.61 |
|
2,617.61 |
-116 |
-4.24% |
6,566.09 |
-156.53 |
-2.33% |
1.756 |
-0.171 |
-8.87% |
|
01-01-2015 |
2,685.19 |
|
2,685.19 |
67.58 |
2.58% |
6,749.40 |
183.31 |
2.79% |
1.341 |
-0.415 |
-23.63% |
|
01-02-2015 |
2,673.08 |
|
2,673.08 |
-12.11 |
-0.45% |
6,946.66 |
197.26 |
2.92% |
1.789 |
0.448 |
33.41% |
|
01-03-2015 |
2,656.95 |
|
2,656.95 |
-16.13 |
-0.60% |
6,773.04 |
-173.62 |
-2.50% |
1.579 |
-0.21 |
-11.74% |
|
01-04-2015 |
2,828.43 |
0.52 |
2,828.43 |
171.48 |
6.45% |
6,960.63 |
187.59 |
2.77% |
1.835 |
0.256 |
16.21% |
|
01-05-2015 |
2,764.88 |
|
2,764.88 |
-63.55 |
-2.25% |
6,984.43 |
23.8 |
0.34% |
1.804 |
-0.031 |
-1.69% |
|
01-06-2015 |
2,588.35 |
|
2,588.35 |
-176.53 |
-6.38% |
6,520.98 |
-463.45 |
-6.64% |
2.03 |
0.226 |
12.53% |
|
01-07-2015 |
2,721.50 |
|
2,721.50 |
133.15 |
5.14% |
6,696.28 |
175.3 |
2.69% |
1.882 |
-0.148 |
-7.29% |
|
01-08-2015 |
2,477.39 |
0.275 |
2,477.39 |
-244.11 |
-8.97% |
6,247.94 |
-448.34 |
-6.70% |
1.95 |
0.068 |
3.61% |
|
01-09-2015 |
2,303.90 |
|
2,303.90 |
-173.49 |
-7.00% |
6,061.61 |
-186.33 |
-2.98% |
1.765 |
-0.185 |
-9.49% |
|
01-10-2015 |
2,623.66 |
|
2,623.66 |
319.76 |
13.88% |
6,361.09 |
299.48 |
4.94% |
1.926 |
0.161 |
9.12% |
|
01-11-2015 |
2,578.26 |
|
2,578.26 |
-45.4 |
-1.73% |
6,356.09 |
-5 |
-0.08% |
1.83 |
-0.096 |
-4.98% |
|
01-12-2015 |
2,681.15 |
|
2,681.15 |
102.89 |
3.99% |
6,242.32 |
-113.77 |
-1.79% |
1.961 |
0.131 |
7.16% |
|
01-01-2016 |
2,317.01 |
|
2,317.01 |
-364.14 |
-13.58% |
6,083.79 |
-158.53 |
-2.54% |
1.561 |
-0.4 |
-20.40% |
|
01-02-2016 |
2,748.74 |
|
2,748.74 |
431.73 |
18.63% |
6,097.09 |
13.3 |
0.22% |
1.337 |
-0.224 |
-14.35% |
|
01-03-2016 |
2,896.01 |
0.575 |
2,896.01 |
147.27 |
5.36% |
6,174.90 |
77.81 |
1.28% |
1.418 |
0.081 |
6.06% |
|
01-04-2016 |
2,752.77 |
|
2,752.77 |
-143.24 |
-4.95% |
6,241.89 |
66.99 |
1.08% |
1.598 |
0.18 |
12.69% |
|
01-05-2016 |
2,674.05 |
7.92372 |
2,674.05 |
-78.72 |
-2.86% |
6,230.79 |
-11.1 |
-0.18% |
1.431 |
-0.167 |
-10.45% |
|
01-06-2016 |
2,766.51 |
|
2,766.51 |
92.46 |
3.46% |
6,504.33 |
273.54 |
4.39% |
0.871 |
-0.56 |
-39.13% |
|
01-07-2016 |
3,036.82 |
|
3,036.82 |
270.31 |
9.77% |
6,724.43 |
220.1 |
3.38% |
0.686 |
-0.185 |
-21.24% |
|
01-08-2016 |
3,277.00 |
0.3 |
3,277.00 |
240.18 |
7.91% |
6,781.51 |
57.08 |
0.85% |
0.642 |
-0.044 |
-6.41% |
|
01-09-2016 |
3,195.60 |
|
3,195.60 |
-81.4 |
-2.48% |
6,899.33 |
117.82 |
1.74% |
0.748 |
0.106 |
16.51% |
|
01-10-2016 |
3,190.57 |
|
3,190.57 |
-5.03 |
-0.16% |
6,954.22 |
54.89 |
0.80% |
1.246 |
0.498 |
66.58% |
|
01-11-2016 |
3,297.09 |
|
3,297.09 |
106.52 |
3.34% |
6,783.79 |
-170.43 |
-2.45% |
1.418 |
0.172 |
13.80% |
|
01-12-2016 |
3,655.85 |
|
3,655.85 |
358.76 |
10.88% |
7,142.83 |
359.04 |
5.29% |
1.24 |
-0.178 |
-12.55% |
|
01-01-2017 |
3,698.05 |
|
3,698.05 |
42.2 |
1.15% |
7,099.15 |
-43.68 |
-0.61% |
1.418 |
0.178 |
14.35% |
|
01-02-2017 |
3,814.62 |
|
3,814.62 |
116.57 |
3.15% |
7,263.44 |
164.29 |
2.31% |
1.151 |
-0.267 |
-18.83% |
|
01-03-2017 |
3,927.17 |
|
3,927.17 |
112.55 |
2.95% |
7,322.92 |
59.48 |
0.82% |
1.14 |
-0.011 |
-0.96% |
|
01-04-2017 |
4,116.09 |
|
4,116.09 |
188.92 |
4.81% |
7,203.94 |
-118.98 |
-1.62% |
1.087 |
-0.053 |
-4.65% |
|
01-05-2017 |
4,373.00 |
0.625 |
4,373.00 |
256.91 |
6.24% |
7,519.95 |
316.01 |
4.39% |
1.049 |
-0.038 |
-3.50% |
|
01-06-2017 |
4,267.00 |
|
4,267.00 |
-106 |
-2.42% |
7,312.72 |
-207.23 |
-2.76% |
1.259 |
0.21 |
20.02% |
|
01-07-2017 |
4,291.00 |
|
4,291.00 |
24 |
0.56% |
7,372.00 |
59.28 |
0.81% |
1.231 |
-0.028 |
-2.22% |
|
01-08-2017 |
3,856.00 |
0.325 |
3,856.00 |
-435 |
-10.14% |
7,430.62 |
58.62 |
0.80% |
1.036 |
-0.195 |
-15.84% |
|
01-09-2017 |
3,948.00 |
|
3,948.00 |
92 |
2.39% |
7,372.76 |
-57.86 |
-0.78% |
1.366 |
0.33 |
31.85% |
|
01-10-2017 |
4,172.00 |
|
4,172.00 |
224 |
5.67% |
7,493.08 |
120.32 |
1.63% |
1.333 |
-0.033 |
-2.42% |
|
01-11-2017 |
4,349.00 |
|
4,349.00 |
177 |
4.24% |
7,326.67 |
-166.41 |
-2.22% |
1.331 |
-0.002 |
-0.15% |
|
01-12-2017 |
4,719.00 |
|
4,719.00 |
370 |
8.51% |
7,687.77 |
361.1 |
4.93% |
1.188 |
-0.143 |
-10.74% |
|
01-01-2018 |
4,712.00 |
|
4,712.00 |
-7 |
-0.15% |
7,533.55 |
-154.22 |
-2.01% |
1.512 |
0.324 |
27.27% |
|
01-02-2018 |
4,699.00 |
|
4,699.00 |
-13 |
-0.28% |
7,231.91 |
-301.64 |
-4.00% |
1.502 |
-0.01 |
-0.66% |
|
01-03-2018 |
4,268.00 |
|
4,268.00 |
-431 |
-9.17% |
7,056.61 |
-175.3 |
-2.42% |
1.35 |
-0.152 |
-10.12% |
|
01-04-2018 |
4,589.00 |
0.71 |
4,589.00 |
321 |
7.52% |
7,509.30 |
452.69 |
6.42% |
1.418 |
0.068 |
5.04% |
|
01-05-2018 |
4,814.00 |
|
4,814.00 |
225 |
4.90% |
7,678.20 |
168.9 |
2.25% |
1.229 |
-0.189 |
-13.33% |
|
01-06-2018 |
4,720.00 |
|
4,720.00 |
-94 |
-1.95% |
7,636.93 |
-41.27 |
-0.54% |
1.278 |
0.049 |
3.99% |
|
01-07-2018 |
4,707.00 |
|
4,707.00 |
-13 |
-0.28% |
7,748.76 |
111.83 |
1.46% |
1.331 |
0.053 |
4.15% |
|
01-08-2018 |
4,755.00 |
0.363 |
4,755.00 |
48 |
1.02% |
7,432.42 |
-316.34 |
-4.08% |
1.429 |
0.098 |
7.36% |
|
01-09-2018 |
4,780.00 |
|
4,780.00 |
25 |
0.53% |
7,510.20 |
77.78 |
1.05% |
1.574 |
0.145 |
10.15% |
|
01-10-2018 |
4,110.00 |
|
4,110.00 |
-670 |
-14.02% |
7,128.10 |
-382.1 |
-5.09% |
1.437 |
-0.137 |
-8.70% |
|
01-11-2018 |
4,182.00 |
|
4,182.00 |
72 |
1.75% |
7,114.66 |
-13.44 |
-0.19% |
1.495 |
0.058 |
4.04% |
|
Mean Return |
1.5% |
|
|
0.155% |
|
|
0.140% |
||||
|
Standard Deviation |
6.5% |
|
|
2.9% |
|
|
|
||||
|
Correlation |
0.565828185 |
|
|
|
|||||||
|
Covariance |
0.001084523 |
|
|
|
|||||||
|
Beta of Stock |
1.259222077 |
|
|
|
|||||||
|
CAPM |
0.16% |
||||||||||
On the basis of CAPM, the expected return of the stock is computed at 0.16%. The same serve as a hurdle rate below which the investment should not be made. This symbolise the rate of return that shall be expected by the investor for undertaking the risk
The actual return of the stock is computed at 1.5%. Thus, it can be seem that the stock is providing extra return compared to expected return computed using Capital Asset Pricing Model.
Computation of Price to Earnings Ratio for 31-12-2017 and 31-12-2016
The computation has been done on the basis of data obtained from (yahoo finance, 2018)
The following Prices have been considered for analysis 01-01-2018 and 01-01-2017 and the Earning earned per share (Basic Earnings) as stated in Balance Sheet of the company for 2017 and 2016. (yahoo finance, 2018)The formula for computation of Price to Earnings Ratio has been presented here-in-below:
Price to Earnings Ratio: Price/ Earnings Per Share
The computation has been presented here-in-below:
|
Price to Earnings Ratio |
||||
|
Sl No |
Particular |
Earning per share(A) |
Price(B) |
P/E Ratio (B/A) |
|
1 |
2017 |
306.7 |
4,712.00 |
15.36 |
|
2 |
2016 |
195.3 |
3,698.05 |
18.94 |
The price to Earnings Ratio symbolise the no of times the price is trading above the earnings. It is an important ratio for understanding the valuation of the company whether the same is undervalued or overvalued. In the present context, the P/E ratio has decreased compared to previous year on account of drastic improvement in Basic Earnings Per Share symbolising a positive sign and scope for investment in the company compared to previous year. Further, average P/E of the industry needs to be looked upon to make any further comment. If the same is above the stock P/E than the stock is undervalued and the same shall be purchased.
Comment on the appropriateness of Capital Structure
The debt to equity ratio of the company represents the no of times the capital is funded by debt compared to equity. The formula for computation of debt to equity ratio is
Debt-to-equity ratio = Debt/ Equity
The computation of the same for the past 2 years has been presented here-in-below:
|
Debt to Equity Ratio |
||||
|
Sl No |
Particular |
Debt(A) |
Equity(B) |
D/E Ratio (A/B) |
|
1 |
2017 |
2019 |
851.00 |
2.37 |
|
2 |
2016 |
1712 |
759.00 |
2.26 |
The idle ratio is 2. Since in the above computation the ratio is greater than 2 symbolising that the company is heavily relying on debt for the purpose of funding projects. Further, for reaching a final conclusion one is required to understand the industry average of debt to equity to comment on appropriateness.
Further, choosing debt over equity has benefit to share holder as the same results in trading in equity and greater chunk of profits at a lower cost at the disposal of the investors. However, this is only one side of the coin and if the company incurs loss the same may add to financial distress of the company. However, in the present circumstance company has been earning profits thus the reliance on debt is having positive impact on its shareholders.
From Profit Point Of View Company has performed better compared to previous year significantly increasing market sentiments. Further, the prices of the company has also seen an uptrend.
Global hotel industry demand is driven by economic growth and an increasing trend for domestic and global travel. Over the long term, the lodging industry has grown broadly in line with Gross Domestic Product (GDP). However, in the UK, demand growth has regularly outpaced GDP growth since 2010.
Further, the future performance of the company shall be better on account of the following reasons:
- There has been 2.6% GDP growth globally over the last 10 years;
- There has been increase in disposable income of the population;
- There has been rise in Middle class resulting in increase of revenue of the company;
- There has been increase in ageing population with desire and means to travel symbolising greater demand of industry;
- Shift to Multi-purpose trips (Anon., 2018)
Further, Simply Wall Street hold the following view for the company:
- InterContinental Hotels Group's earnings growth is expected to exceed the United Kingdom of Great Britain and Northern Ireland market average;(Anon., 2018)
- InterContinental Hotels Group's revenue growth is expected to exceed the United Kingdom of Great Britain and Northern Ireland market average;
- InterContinental Hotels Group's earnings growth is expected to exceed the low risk savings rate of 1.4%.
Anon., 2018. IHG. [Online] Available at: https://www.ihgplc.com/about-us/industry-and-market-trends[Accessed 5 November 2018].
Anon., 2018. InterContinental Hotels Group. [Online] Available at: https://simplywall.st/stocks/gb/consumer-services/lse-ihg/intercontinental-hotels-group-shares#future?unique_symbol=LSE:IHG&l=1&t=cnfg_cresbeznapr&s=1&id=257710&utm_source=post&utm_medium=finance_user<=Conc_ticker&utm_campaign=Conc_ticker
[Accessed 5 November 2018].
Anon., n.d. InterContinental Hotels Group PLC (IHG.L). [Online] Available at: https://uk.finance.yahoo.com/quote/IHG.L/history?p=IHG.L[Accessed 5 November 2018].
Fusion Media Limited., 2018. FTSE 100. [Online] Available at: https://in.investing.com/indices/uk-100-historical-data[Accessed 5 November 2018].
yahoo finance, 2018. InterContinental Hotels Group PLC (IHG.L). [Online] Available at: https://uk.finance.yahoo.com/quote/IHG.L/history?p=IHG.L[Accessed 5 November 2018].
yahoo finance, 2018. InterContinental Hotels Group PLC (IHG.L). [Online] Available at: https://uk.finance.yahoo.com/quote/IHG.L/history?p=IHG.L[Accessed 5 November 2018].
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