Part 1: Dividend Analysis (two to three paragraphs):
Create a table that illustrates the annual dividends per share paid by your selected company over the past 8 years. If the company has not paid dividends for 8 years, include as many years as available.
Calculate the growth in annual dividends per share each year and include this annual growth rate in your table.
To find the dividends your company has paid in the past 8 years. Calculate the average dividend growth rate over the following periods:
the most recent 8 years,
the most recent 5 years, and
the most recent 3 years.
Summarize the trend in the dividend growth rates.
Have the dividend growth rates increased or decreased? By how much? Has the increase or decrease been steady or varied from year to year?
Determine two distinct estimates of the future dividend growth rate for this company: a high-end growth rate and a low-end growth rate. You are to choose these growth rates based on what is reasonable from the data you have on the company’s dividend growth in prior years, as presented in your table. The two future dividend growth rates can be any of following:
the most recent year growth rate;
the average growth rate over the 8-year period;
the average growth rate over the most recent 5 years;
the average growth rate of the most recent 3 years; or
a growth rate you select that is reasonable, given the 8-year, 5-year, and 3-year averages, as well as the recent year growth rates.
NOTE: Both dividend growth rates must be lower than the required rate of return used in the constant growth formula. See Part 2 below for the required rate of return to use in the constant growth formula.
Justify the determined the high-end dividend growth rate and low-end dividend growth rates for your company. In your justification, provide a least two financial facts from your Week 1 and Week 2 assignments to support your determination.
Part 2: Preliminary Valuation: (two to three paragraphs)
Calculate the stock price for your selected company using the constant growth formula and the low-end dividend growth rate you determined in Part 1. Show all calculations for this estimated stock price using the low-end dividend growth rate.
For the required rate of return (r), use the following assumptions:
For a large capitalization company (greater than $10.0 billion in market capitalization) use 10.0%.
For a mid-cap company (between $2.0 billion and $10.0 billion in market capitalization) use 12.0%.
For a small-cap company (less than $2.0 billion in market capitalization) use 15.0%.
Show your calculations.
In a similar manner, calculate another estimate of the stock price for your selected company using the constant growth formula and the high-end dividend growth rate.
Use the same assumptions for the required rate of return (r) that you used for the low-end stock price, other than using the high-end dividend growth rate.
Show your calculations.
Compare each of the two stock prices you just calculated to the current stock price per share of the company.
State whether each constant growth stock price (low-end and high-end) is above or below the current price.
State whether each constant growth stock price (low-end and high-end) indicates if the stock price is currently under-valued or over-valued in the market.
Determine your concluded stock value, based on the two calculations using the constant growth formula.
Justify your conclusion of value for your stock, using either the high-end stock price or the low-end stock price from the constant growth formula. Include least two financial facts from your Week 1 and Week 2 analyses.
The Section 3: Dividend Analysis and Preliminary Valuation paper
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Costco Wholesale Corp (NMS: COST)
Company Financials
Income Statement
Exchange rate used is that of the Year End reported
date
As Reported Annual Income Statement
Report Date
08/28/2022
Currency
USD
Audit Status
Not Qualified
Consolidated
Yes
Scale
Thousands
Net sales
$ 222,730,000
Membership fees
$
4,224,000
Total revenue
$ 226,954,000
Merchandise costs
$ 199,382,000
Selling, general & administrative expenses
$ 19,779,000
Preopening expenses
Operating income
$
7,793,000
Interest expense
$
158,000
Interest income
$
61,000
Foreign-currency transactions gains (losses), net
$
106,000
Other interest income & other income, net
$
38,000
Interest income & other income, net
$
205,000
Income before income taxes – domestic
$
5,759,000
Income before income taxes – foreign
$
2,081,000
Income before income taxes
$
7,840,000
Current federal provison (benefit) for income taxes
$
798,000
Deferred federal provison (benefit) for income taxes
$
(35,000)
Total federal provison (benefit) for income taxes
$
763,000
Current state provison (benefit) for income taxes
$
333,000
Deferred state provison (benefit) for income taxes
$
(5,000)
Total state provison (benefit) for income taxes
$
328,000
Current foreign provison (benefit) for income taxes
$
851,000
Deferred foreign provison (benefit) for income taxes
$
(17,000)
Total foreign provison (benefit) for income taxes
$
834,000
Provision for income taxes
$
1,925,000
Net income (loss) including noncontrolling interests
$
5,915,000
Net loss (income) attributable to noncontrolling interests$
(71,000)
Net income attributable to Costco Wholesale Corp
$
5,844,000
Weighted average shares outstanding – basic
443,651
Weighted average shares outstanding – diluted
444,757
Year end shares outstanding
442,664
Net income (loss) per common share – basic
$
13.17
Net income (loss) per common share – diluted
$
13.14
Cash dividends declared per common share
$
3.38
Number of full time employees
Number of part time employees
Total number of employees
304000
Number of common stockholders
10279
Foreign currency translation adjustments
-721000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
08/29/2021
USD
Not Qualified
Yes
Thousands
192,052,000
3,877,000
195,929,000
170,684,000
18,461,000
76,000
6,708,000
171,000
41,000
56,000
46,000
143,000
4,931,000
1,749,000
6,680,000
718,000
84,000
802,000
265,000
11,000
276,000
557,000
(34,000)
523,000
1,601,000
5,079,000
(72,000)
5,007,000
443,089
444,346
441,825
11.30
11.27
12.98
288000
9958
181000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
08/30/2020
USD
Not Qualified
Yes
Thousands
163,220,000
3,541,000
166,761,000
144,939,000
16,332,000
55,000
5,435,000
160,000
89,000
7,000
(4,000)
92,000
4,204,000
1,163,000
5,367,000
616,000
77,000
693,000
230,000
8,000
238,000
372,000
5,000
377,000
1,308,000
4,059,000
(57,000)
4,002,000
442,297
443,901
441,255
9.05
9.02
2.70
156000
117000
273000
9690
162000
Balance Sheet
Exchange rate used is that of the Year End reported
date
As Reported Annual Balance Sheet
Report Date
Currency
Audit Status
Consolidated
Scale
Cash & cash equivalents
08/28/2022
USD
Not Qualified
Yes
Thousands
$ 10,203,000
Short-term investments
Receivables, net
Merchandise inventories – U.S.
Merchandise inventories – Canada
Merchandise inventories – other international
Merchandise inventories
Other current assets
Total current assets
Land
Buildings & improvements
Equipment & fixtures
Construction in progress
Property & equipment, gross
$
$
$
$
$
$
$
$
$
$
$
$
$
Less accumulated depreciation & amortization
Property & equipment, net
Operating lease right-of-use assets
Other long-term assets
Total assets
Accounts payable
Current portion long-term debt
Accrued salaries & benefits
Accrued member rewards
Deferred membership fees
Other current liabilities
Total current liabilities
Senior notes
Other long-term debt
Total long-term debt
Less unamortized debt discounts & issuance costs
Less: current portion
Long-term debt, excluding current portion
Long-term operating lease liabilities
Other long-term liabilities
Total liabilities
Common stock
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings
Total Costco Wholesale Corp stockholders’ equity
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
08/29/2021
USD
Not Qualified
Yes
Thousands
11,258,000
$
08/30/2020
USD
Not Qualified
Yes
Thousands
12,277,000
846,000
2,241,000
13,160,000
1,966,000
2,781,000
17,907,000
1,499,000
32,696,000
7,955,000
20,120,000
10,275,000
1,582,000
39,932,000
$
$
$
$
$
$
$
$
$
$
$
$
$
917,000
1,803,000
10,248,000
1,456,000
2,511,000
14,215,000
1,312,000
29,505,000
7,507,000
19,139,000
9,505,000
1,507,000
37,658,000
$
$
$
$
$
$
$
$
$
$
$
$
$
1,028,000
1,550,000
8,871,000
1,310,000
2,061,000
12,242,000
1,023,000
28,120,000
6,696,000
17,982,000
8,749,000
1,276,000
34,703,000
15,286,000
24,646,000
2,774,000
4,050,000
64,166,000
17,848,000
73,000
4,381,000
1,911,000
2,174,000
5,611,000
31,998,000
6,000,000
590,000
6,590,000
(33,000)
73,000
6,484,000
2,482,000
2,555,000
43,519,000
2,000
6,884,000
(1,829,000)
15,585,000
20,642,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
14,166,000
23,492,000
2,890,000
3,381,000
59,268,000
16,278,000
799,000
4,090,000
1,671,000
2,042,000
4,561,000
29,441,000
6,800,000
731,000
7,531,000
(40,000)
799,000
6,692,000
2,642,000
2,415,000
41,190,000
4,000
7,031,000
(1,137,000)
11,666,000
17,564,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
12,896,000
21,807,000
2,788,000
2,841,000
55,556,000
14,172,000
95,000
3,605,000
1,393,000
1,851,000
3,728,000
24,844,000
6,800,000
857,000
7,657,000
(48,000)
95,000
7,514,000
2,558,000
1,935,000
36,851,000
4,000
6,698,000
(1,297,000)
12,879,000
18,284,000
ROA (return on assets)
a ratio that masures how profitable a cmpany is given its assets
net income / average total assets
Total Assets (in Net Income (in
Thousands)
Thousands)
ROA
2022 $ 64,166,000 $ 5,915,000
2021 $ 59,268,000 $ 5,079,000
$ 123,434,000
avg total assets $ 61,717,000
Year
9.58%
8.23%
ROE (return on equity)
income earned for each doller invested by stockholders
avg stockholders’ equity is beg. Bal + ending balance / 2
net income / avg stockholders’ equity
Year
Avg.
Stockholders’ ROE
Equity
5,915,000 $ 20,642,000
5,079,000 $ 17,564,000
$ 38,206,000
$ 19,103,000
Net Income (in
Thousands)
2022 $
2021 $
30.96%
26.59%
Noncontrolling interests
Total equity
$
5,000
$ 20,647,000
$
$
514,000
18,078,000
$
$
421,000
18,705,000
Cash Flows
Exchange rate used is that of the Year End reported
date
As Reported Annual Cash Flow
Report Date
08/28/2022
Currency
USD
Audit Status
Not Qualified
Consolidated
Yes
Scale
Thousands
Net income (loss) including noncontrolling interests
$
5,915,000
Depreciation & amortization
$
1,900,000
Non-cash lease expense
$
377,000
Stock-based compensation
$
724,000
Other non-cash operating activities, net
$
76,000
Deferred income taxes
$
(37,000)
Merchandise inventories
$ (4,003,000)
Accounts payable
$
1,891,000
Other operating assets & liabilities, net
$
549,000
Net cash flows from operating activities
$
7,392,000
Purchases of short-term investments
$ (1,121,000)
Maturities & sales of short-term investments
$
1,145,000
Additions to property & equipment
$ (3,891,000)
Acquisitions
Other investing activities, net
$
(48,000)
Net cash flows from investing activities
$ (3,915,000)
Change in bank payments outstanding
Proceeds from short-term borrowings
Proceeds from issuance of long-term debt
Repayments of long-term debt
$
(800,000)
Minimum tax withholdings on stock-based awards
Tax withholdings on stock-based awards
$
(363,000)
Repurchases of common stock
$
(439,000)
Cash dividend payments
$ (1,498,000)
Dividend to noncontrolling interest
$
(208,000)
Acquisition of noncontrolling interest
$
(842,000)
Other financing activities, net
$
(133,000)
Net cash flows from financing activities
$ (4,283,000)
Effect of exchange rate changes on cash & cash equivalents
$
(249,000)
Net change in cash & cash equivalents
$ (1,055,000)
Cash & cash equivalents beginning of year
$ 11,258,000
Cash & cash equivalents end of year
$ 10,203,000
Cash paid during the year for interest
$
145,000
Cash paid during the year for income taxes, net
$
1,940,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
08/29/2021
USD
Not Qualified
Yes
Thousands
5,079,000
1,781,000
286,000
665,000
85,000
59,000
(1,892,000)
1,838,000
1,057,000
8,958,000
(1,331,000)
1,446,000
(3,588,000)
(62,000)
(3,535,000)
188,000
41,000
(94,000)
(312,000)
(496,000)
(5,748,000)
(67,000)
(6,488,000)
46,000
(1,019,000)
12,277,000
11,258,000
149,000
1,527,000
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
08/30/2020
USD
Not Qualified
Yes
Thousands
4,059,000
1,645,000
194,000
619,000
42,000
104,000
(791,000)
2,261,000
728,000
8,861,000
(1,626,000)
1,678,000
(2,810,000)
(1,163,000)
30,000
(3,891,000)
137,000
3,992,000
(3,200,000)
(330,000)
(196,000)
(1,479,000)
(71,000)
(1,147,000)
70,000
3,893,000
8,384,000
12,277,000
124,000
1,052,000
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Costco Wholesale Corp (NMS: COST)
Company Financials
Income Statement
Exchange rate used is that of the Year End reported
date
As Reported Annual Income Statement
Report Date
08/28/2022
Currency
USD
Audit Status
Not Qualified
Consolidated
Yes
Scale
Thousands
Net sales
100.00%
Membership fees
1.90%
Total revenue
101.90%
Merchandise costs
89.52%
Selling, general & administrative expenses
8.88%
Preopening expenses
NM
Operating income
3.50%
Interest expense
0.07%
Interest income
0.03%
Foreign-currency transactions gains (losses), net
0.05%
Other interest income & other income, net
0.02%
Interest income & other income, net
0.09%
Income before income taxes – domestic
2.59%
Income before income taxes – foreign
0.93%
Income before income taxes
3.52%
Current federal provison (benefit) for income taxes
0.36%
Deferred federal provison (benefit) for income taxes
-0.02%
Total federal provison (benefit) for income taxes
0.34%
Current state provison (benefit) for income taxes
0.15%
Deferred state provison (benefit) for income taxes
0.00%
Total state provison (benefit) for income taxes
0.15%
Current foreign provison (benefit) for income taxes
0.38%
Deferred foreign provison (benefit) for income taxes
-0.01%
Total foreign provison (benefit) for income taxes
0.37%
Provision for income taxes
0.86%
Net income (loss) including noncontrolling interests
2.66%
Net loss (income) attributable to noncontrolling interests
-0.03%
Net income attributable to Costco Wholesale Corp
2.62%
Weighted average shares outstanding – basic
Weighted average shares outstanding – diluted
Year end shares outstanding
Net income (loss) per common share – basic
Net income (loss) per common share – diluted
Cash dividends declared per common share
Number of full time employees
Number of part time employees
Total number of employees
Number of common stockholders
Foreign currency translation adjustments
08/29/2021
USD
Not Qualified
Yes
Thousands
100.00%
2.02%
102.02%
88.87%
9.61%
0.04%
3.49%
0.09%
0.02%
0.03%
0.02%
0.07%
2.57%
0.91%
3.48%
0.37%
0.04%
0.42%
0.14%
0.01%
0.14%
0.29%
-0.02%
0.27%
0.83%
2.64%
-0.04%
2.61%
08/30/2020
USD
Not Qualified
Yes
Thousands
100.00%
2.17%
102.17%
88.80%
10.01%
0.03%
3.33%
0.10%
0.05%
0.00%
0.00%
0.06%
2.58%
0.71%
3.29%
0.38%
0.05%
0.42%
0.14%
0.00%
0.15%
0.23%
0.00%
0.23%
0.80%
2.49%
-0.03%
2.45%
Balance Sheet
Exchange rate used is that of the Year End reported
date
As Reported Annual Balance Sheet
Report Date
Currency
Audit Status
Consolidated
Scale
Cash & cash equivalents
Short-term investments
Receivables, net
Merchandise inventories – U.S.
Merchandise inventories – Canada
Merchandise inventories – other international
Merchandise inventories
Other current assets
Total current assets
Land
Buildings & improvements
Equipment & fixtures
Construction in progress
Property & equipment, gross
Less accumulated depreciation & amortization
Property & equipment, net
Operating lease right-of-use assets
Other long-term assets
Total assets
Accounts payable
Current portion long-term debt
Accrued salaries & benefits
Accrued member rewards
Deferred membership fees
Other current liabilities
Total current liabilities
Senior notes
Other long-term debt
Total long-term debt
Less unamortized debt discounts & issuance costs
Less: current portion
Long-term debt, excluding current portion
Long-term operating lease liabilities
Other long-term liabilities
Total liabilities
Common stock
Additional paid-in capital
Accumulated other comprehensive income (loss)
Retained earnings
Total Costco Wholesale Corp stockholders’ equity
Noncontrolling interests
Total equity
Cash Flows
Exchange rate used is that of the Year End reported
date
08/28/2022
USD
Not Qualified
Yes
Thousands
15.90%
1.32%
3.49%
20.51%
3.06%
4.33%
27.91%
2.34%
50.96%
12.40%
31.36%
16.01%
2.47%
62.23%
23.82%
38.41%
4.32%
6.31%
100.00%
27.82%
0.11%
6.83%
2.98%
3.39%
8.74%
49.87%
9.35%
0.92%
10.27%
-0.05%
0.11%
10.11%
3.87%
3.98%
67.82%
0.00%
10.73%
-2.85%
24.29%
32.17%
0.01%
32.18%
08/29/2021
USD
Not Qualified
Yes
Thousands
19.00%
1.55%
3.04%
17.29%
2.46%
4.24%
23.98%
2.21%
49.78%
12.67%
32.29%
16.04%
2.54%
63.54%
23.90%
39.64%
4.88%
5.70%
100.00%
27.47%
1.35%
6.90%
2.82%
3.45%
7.70%
49.67%
11.47%
1.23%
12.71%
-0.07%
1.35%
11.29%
4.46%
4.07%
69.50%
0.01%
11.86%
-1.92%
19.68%
29.63%
0.87%
30.50%
08/30/2020
USD
Not Qualified
Yes
Thousands
22.10%
1.85%
2.79%
15.97%
2.36%
3.71%
22.04%
1.84%
50.62%
12.05%
32.37%
15.75%
2.30%
62.46%
23.21%
39.25%
5.02%
5.11%
100.00%
25.51%
0.17%
6.49%
2.51%
3.33%
6.71%
44.72%
12.24%
1.54%
13.78%
-0.09%
0.17%
13.53%
4.60%
3.48%
66.33%
0.01%
12.06%
-2.33%
23.18%
32.91%
0.76%
33.67%
As Reported Annual Cash Flow
Report Date
08/28/2022
Currency
USD
Audit Status
Not Qualified
Consolidated
Yes
Scale
Thousands
Net income (loss) including noncontrolling interests
Depreciation & amortization
Non-cash lease expense
Stock-based compensation
Other non-cash operating activities, net
Deferred income taxes
Merchandise inventories
Accounts payable
Other operating assets & liabilities, net
Net cash flows from operating activities
Purchases of short-term investments
Maturities & sales of short-term investments
Additions to property & equipment
Acquisitions
Other investing activities, net
Net cash flows from investing activities
Change in bank payments outstanding
Proceeds from short-term borrowings
Proceeds from issuance of long-term debt
Repayments of long-term debt
Minimum tax withholdings on stock-based awards
Tax withholdings on stock-based awards
Repurchases of common stock
Cash dividend payments
Dividend to noncontrolling interest
Acquisition of noncontrolling interest
Other financing activities, net
Net cash flows from financing activities
Effect of exchange rate changes on cash & cash equivalents
Net change in cash & cash equivalents
Cash & cash equivalents beginning of year
Cash & cash equivalents end of year
Cash paid during the year for interest
Cash paid during the year for income taxes, net
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Costco Wholesale Corp (NMS: COST)
Exchange rate used is that of the Year End reported date
Profitability Ratios
ROA % (Net)
ROE % (Net)
ROI % (Operating)
EBITDA Margin %
Calculated Tax Rate %
Revenue per Employee
08/28/2022
9.5
30.68
29.91
4.32
24.55
748610
08/29/2021
8.75
28.01
26.41
4.36
23.97
682178
08/30/2020
7.95
23.94
22.73
4.25
24.37
612524
Liquidity Ratios
Quick Ratio
Current Ratio
Net Current Assets % TA
08/28/2022
0.42
1.02
1.09
08/29/2021
0.47
1
0.11
08/30/2020
0.6
1.13
5.9
Debt Management
LT Debt to Equity
Total Debt to Equity
Interest Coverage
08/28/2022
0.31
0.32
132.08
08/29/2021
0.38
0.43
79.86
08/30/2020
0.41
0.42
72.47
Asset Management
Total Asset Turnover
Receivables Turnover
Inventory Turnover
Accounts Payable Turnover
Accrued Expenses Turnover
Property Plant & Equip Turnover
Cash & Equivalents Turnover
08/28/2022
3.69
112.55
12.41
13.34
37.76
9.46
21.21
08/29/2021
3.42
117.19
12.9
12.9
36.52
8.67
16.7
08/30/2020
3.31
108.41
12.26
12.94
35.75
7.83
16.19
Per Share
Cash Flow per Share
Book Value per Share
08/28/2022
16.71
46.63
08/29/2021
20.27
39.75
08/30/2020
20.09
41.44
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Costco Wholesale Corp (NMS: COST)
* all results are stated in US
Dollars
Target Country (United States)
Peer Grouping by:
Peer Scope:
Company Name
NAIC
country
ROA %
(Net) latest
ROE %
Gross Net Profit
(Net) – Margin % Margin %
latest
– latest
– latest
Quick
Ratio latest
Current LT Debt
Ratio – to Equity
latest
– latest
Total Interest
Total Inventory
Debt to Coverag
Asset Turnover
Equity – e – latest Turnover
– latest
latest
– latest
Albertsons Companies Inc
Andersons Inc
BJ’s Wholesale Club Holdings Inc
Costco Wholesale Corp
Dollar General Corp
Dollar Tree Inc
Sunoco LP
Target Corp
Walmart Inc
5.59
2.86
8.56
9.50
8.58
7.24
7.51
5.20
4.79
50.93
11.54
60.72
30.68
40.27
19.67
54.19
23.17
14.60
28.02
3.95
17.77
12.15
31.23
31.54
5.36
24.64
24.14
1.95
0.76
2.66
2.57
6.38
5.70
1.85
2.55
1.91
0.13
0.54
0.10
0.42
0.06
0.15
0.69
0.20
0.18
0.74
1.37
0.67
1.02
1.29
1.51
1.41
0.92
0.82
4.73
0.41
0.45
0.31
1.26
0.39
3.91
1.43
0.51
5.59
0.73
0.84
0.32
1.26
0.39
3.91
1.44
0.58
5.34
3.83
15.55
132.08
15.75
17.85
3.65
8.05
10.90
2.87
3.78
3.22
3.69
1.34
1.27
4.07
2.04
2.50
12.04
9.39
12.12
12.41
4.21
3.95
35.94
6
8.20
Average
6.65
33.97
19.87
2.93
0.27
1.08
1.49
1.67
23.67
2.75
11.58
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