Financial Analysis of Ferris

Finance:

Ferris finished year 8 strong with a stock price of $31.91 and market cap of $85 million. Based on the company's growth in the last 3 years, the price is expected to be at $40 by the end of next year. Retained earnings have and will continue to play a major role in share maximization. Our goal for the immediate future is to avoid issuing new shares to raise cash, in order to prevent share dilution.

Return on equity has been decreasing in the last three years; however, it is a big increase from round one. Despite the recent decrease, ROE remains strong and above industry average. The reason for the decrease is the fact that total equity has been increasing at a higher rate than net income. From 2017 to 2019, total equity has increased by 439%.

The company struggled in the initial years to generate a positive ROS. However, management has taken corrective action to convert revenues into profits, resulting in a positive ROS in the previous 3 years. We will continue to monitor our expenses and margins closely to ensure the ROS number will increase.

As one of the biggest companies in the industry in terms of total assets, Ferris has a strong return on assets at 6.4%. The ratio has increased in the last 3 years, and is projected to continue that trend in the coming years.

Selected Financials Comparison (As of 2019)

Financial Ferris Erie Baldwin

Working Capital $55,338 $75,608 $35,834

Current Ratio $3.05 $5.75 $3.47

Cash $63,035 $52,323 $22,547

Total Liabilities $113,373 $120,932 $101,419

Total Assets $150,192 $266,658 $141,080

Ferris is an excellent position in terms of liquidity. Our current ratio is well above one, indicating we have sufficient assets on hand to meet all short-term obligations. In addition, the company has the highest cash on hand among competitors with $63 million. Management has always believed in growing the company to meet customer needs, and this is evident from total assets of $150 million (second highest behind Erie).

Year Cash From Operations Total Period Costs

2016 $15,362 $42,490

2017 $68,502 $35,022

2018 $25,910 $32,141

2019 $30,684 $33,175

As evident from the above chart, our cash flow from operations has increased from 2016 to 2018. In 2017, it was the highest ever at $68 million. At the same time, total period costs have been decreasing. This indicates that the company's sources of cash are more than its uses (excluding variable costs). If management can continue to maintain this trend, the company will benefit significantly in terms of net cash flow.

Ferris has utilized long-term debt heavily