Adairs Limited Enterprises Financial Analysis
Introduction
The report involves performing a financial analysis of a company present in the S&P/ASX 200. In my case, I will perform the analysis on Adairs Limited. Horizontal analysis will be used to calculated Adairs Limited Financial Statement over a two-year period. Horizontal analysis is “used to compare data from two or more periods, side-by-side” (Ang, 2019). Horizontal analysis is a technique used to show changes and to evaluate trends. Horizontal analysis uses the earliest period as the base period and its statement is used to compare with the later periods. Horizontal analysis will be conducted for Adairs Limited income statement, balance sheet, and share prices. Every company will fluctuate with positive and negative trend. The companies that are effectively monitoring its financial records will take the negative trends and turn them into positive trend. Adairs Limited has a great deal of positive trend as each year the company increase in Revenue and assets. The company’s sales and gross profit continues to increase year after year. Delivery expense had a drastic increase due to the company’s expansion of its delivery service, putting them as one of the best furniture delivering companies in the continent. Telephone expense has also shown a steady increase in utilities expense as the company opened to new systems and technologies. However, as much as the telephone expense has increased, it has been lower than the expected expense since most communications are now done online. The company is seeing growth and success as stockholder’s equity continues to increase over the years. Adairs Limited seems to have no negative trend as its sales, net income and gross profit continues to increase. Financial ratios are numerical information that gives insight analysis into the liquidity of a business. Ratio does not show the whole truth as it just compares different accounts and statements. Liquidity is a measure a business use to assess its assets for the conversion to cash. Liquidity ratios is used by businesses to assess its capability in meeting its short-term goals or obligations. Liquidity ratios is used by investors to assess a firm’s consistency in meeting its short-term debt. Liquidity ratios are used by investors to see the path a company will be heading and whether there will be any growing concerns.
Company Overview
Adairs Limited is a privately owned public organization, getting income from the retail offer of homewares and home goods. The organization employs around 2,000 individuals, works in Australia and New Zealand, and is regulated by its administrative center in Scoresby, Victoria. It is recorded on the ASX under the code ADH. Adairs Limited works overwhelmingly in manchester retailing, with more than 160 stores across Australia and 6 in New Zealand. The organization sells the accompanying items through its Adairs, Adairs Homemaker, Adairs Kids, and the Urban Home Republic marked stores: i. Bedroom - covers, sheets, cushions, blankets, and pillows. ii. Washroom - towels, shower mats, robes, and home consideration iii. Homewares - lighting, mats, napery, mirrors, and cushions iv. Furniture - footstools, tables, and shelves v. Adairs Kids - room furniture, presents, nursery and Christmas things with a design accentuation on youngster
Overview of the industry profitability based on Porter’s 5 forces assessment.
The fundamental explanation behind making business methodologies is to have an edge during the opposition with different organizations in the market. Porter’s five powers model glances at expanding organization profit. The organization utilizes this model in scrutinizing if the organization is advancing in the correct way during their business exchanges as to the market climate. Business techniques can be made from breaking down the market and distinguishing which segments are existing and what the organization needs to do so as to accomplish benefit amplification (Bennett & Hugen, 2018). This is the place the five powers model comes in. The model examines five significant powers that influence the business during its market period. The powers take a look at the market and how it is advancing from every day with various highlights that emerge. These powers are:
1. Competition in the business
Business rivalry generally happens to at least two adversary organizations that are in the market and are selling a similar item. This implies that clients need to pick between one organization and the other. The organizations could be founded on any field, be it horticulture, innovation, science, or even accommodation. So as to have an upper hand over the other organization, new methodologies are made to help the benefit it achieving benefit augmentation (Tsay, 2019). This achieves advancement so as to stay aware of the market and furthermore offer the public what the other organization doesn’t have. Organizations likewise improve their administrations so as to guarantee that clients would select to pick their organization over the adversary. There are numerous procedures an association will concoct to guarantee that they have the high ground on the adversary contender. Acquiring more clients is the principal focal point of most systems so as to expand benefits. Notwithstanding, one ought to likewise take note of that the clients who are accomplished at times leave the organization inevitably (Miller, Vandome, & John, 2017). Holding your clients additionally turns into a significant assignment. This is generally done by granting your steadfast clients with rewards and coupons because of their devotion. Adairs Limited uses this method in ensuring that they have low-cost outlets and very fast deliveries which help retain their current customers and attain new ones. The most ideal approach to stay aware of the serious market and outperform it is by guaranteeing that their clients can utilize their systems proficiently. So as to do this, the company has had an effective website for having customer make orders and get help from the company’s customer service.
2. Potential of new contestants
New contestants are showing up much more oftentimes especially in this growing economy. The danger of new participants accompanies the danger of taking your clients since they may offer an item like yours however with more refinement (Hewsbury, 2018). Thusly it is truly essential to screen new contestants and what they have to bring to the table to the clients in the market. The organization should consider the items that are gotten by new participants and guarantee that they are one stage above them if the items they contain are compromising their economy. It is likewise critical to guarantee that the items which are offered by the organization are enhanced to outperform those of the new participants. Nonetheless, now and again the new participant might be delivering complimentary products that may help your organization deal. It is essential to collaborate with such an organization since it would reduce expenses of promoting and increment the benefit augmentation of the organization. For instance, if an organization A is selling vehicles, and an organization B is another participant in the market which sells vehicle save parts, the two could converge to have an organization that sells the two items, or organization A could secure organization B. For Adairs Limited, they could require to merge with another company so as to beat the new entrants. The company has multiple shops and has built a good relationship with its customers to ensure they continue being their number 1 choice (Porter, 2018). However, the company should be wary of the new market entrants and keep watch of new methods that come about in marketing and technology.
3. Power of suppliers
Suppliers offer merchandise to the organization as mentioned by the organization. The purchases by the organization from the providers are generally crude materials which are utilized by the organization to measure into a completed item that is offered to the clients. By and large, providers are recruited under an agreement whereby the cost for a while, similar to one year, is summarized and paid during the finish of the financial year. The providers along these lines go about as a significant entertainer in the market. The provider likewise straightforwardly decides the cost of the completed item. For instance, if the furniture provider was to increase the cost of wood by 30%, the organization would likewise expand the cost of the furniture by a comparable rate or higher so as to accomplish benefits. This on occasion makes the business drop since others see the cost to be too high thus causing misfortune. Adairs Limited ought to guarantee that they have a provider who is reliable and can be depended on. This will guarantee that the items they offer are offered effectively and with insignificant deferrals, assuming any (Miller, Vandome, & John, 2017). With the organization’s large customer presence and handling of furniture items and furnishing materials, they have to ensure they have the right supplier with furnishing materials and products which ensures that the products they produce are quality and not prone to easy breakages.
4. Power of customers
Clients are the general purpose of working together in a market. Customers are the most important resources to having while possessing a business. The clients are the ones who buy your item and empower you to get different deals and obtain the greatest benefits. So as to guarantee that the company has a decent business, which is decided by the benefit augmentation, the company ought to guarantee that the clients are content with the item given to them and the benefits provided. Forming the business to zero in additionally on client requirements encourages the company to gain more clients in the business. The purchasing power of the customer ought to likewise be examined to guarantee that the value which is put on an item isn’t too high to even think about scaring clients away, neither should it be too low with the end goal that you will cause misfortunes (Porter, 2018). The client criticism on various products ought to likewise be investigated to guarantee that the items can be improved in order to acquire clients and keep the ones the company already has. Adairs Limited ought to guarantee that they analyze the customer requirements and valuate the price which they should price their products. The valuation of products by Adairs Limited is very affordable for clients. They also have coupons and other methods of ensuring the customers can purchase the product. Recently, they introduced a 10% off on all products purchased when the customers subscribed for the newsletter. This creates a win-win situation which enables the company to keep up with their customers and also providing them with quality and affordable products.
5. Threat of Substitute Products
Items now and again have substitutes that are sold by different organizations. The same applies to the furniture and homeware materials sold by Adairs Limited. There are very many various situations for this situation relying upon client inclination. Bamboo is one such alternative that can be utilized to make solid and flexible structures. Despite the fact that bamboo isn’t 100% friendly to the environment, it is a fundamentally more economical option in contrast to lumber. Some people are also looking for ways they can live without affecting the environment which means they would llove trees to be cut down to make timber, therefore choosing a different material. With this information, it difficult to perceive how an organization may pick its business techniques. However, as much as some people may opt for another material for the furniture, the threat of substitutes is a cause of concern when the products are obsoleting quickly but the furniture products are not going to be obsoleted. Going 500 years back, the need for furniture products was there and it will remain there for the coming 500 years as well. There have been innovations in the product but the need for a bed has been there for centuries. Therefore, there is no close substitute for furniture products in the near or even long future which reduces the threat of substitutes for the furniture industry.
Overview of the major strengths and weaknesses of the business strategy of Adairs Limited
Competitive advantage in the Marketing procedure of Domino’s
Competitive advantage in the Marketing procedure of Adairs Limited: i) Supply chain Vertical incorporation over the supply chain has helped the organization in adjusting its assets and controlling the cost structure in order to be serious in the market and simultaneously rise as the most favoured furniture supplier. ii) Quick Delivery Whether you purchase homeware or furniture at their outlets or get it conveyed at your place, one can generally rely on Adairs Limited for its fast conveyance administrations which have helped the organization in improving its worth conveyance measure.
Marketing Mix of Adairs Limited
The model is applied to talk about the Marketing Strategy of Adairs Limited.
1. Product
This Marketing Strategy component mirrors the answer for the clients’ needs. Adairs Limited ought to create special item configuration, name and highlights to hang out in the serious market. Following components ought to be considered to build up the item methodology quality, assortment, highlights, bundling, brand name and expanded administrations.
2. Pricing
This Marketing Strategy component requires an assessment of the estimation of items for focused clients. The valuing system of the Adairs Limited will zero in on setting the rundown value, credit terms, installment period and limits. In the event that Adairs Limited chooses to pick the value infiltration technique, it should set the lower cost than contenders. The organization will have the option to win piece of the overall industry dependent on limited evaluating. Be that as it may, the board ought to know about the expected reprisal from rivals as an undesired value war. The decision of skimming system will require away from of separation premise and how such separation legitimizes the additional cost.
3. Distribution
This Marketing Strategy component requires Adairs Limited to settle on some significant choices when building up its appropriation plan. It ought to choose: i. Regardless of whether the organization needs to make the item accessible to focused client fragments through its channels, or it needs a dissemination accomplice to serve the clients’ needs. ii. Regardless of whether the circulation will be immediate (including no mediators), or roundabout. In the event that circuitous dissemination methodology is embraced, the quantity of agents must be chosen (wholesalers, retailers and so on) iii. Regardless of whether it is keen on: customary physical circulation organization, online dissemination or a blend of both. Certain online retailers like Amazon are accessible if online appropriation methodology is picked. The organization can likewise build up its online site to sell the item. The improvement of viable marketing mix procedures relies upon Adairs Limited’s information on its potential client base. The methodologies will be more compelling if the organization comprehends the requirements, desires, and demeanour of its clients. The itemized examination leads towards the distinguishing proof of various client profiles.
Porter’s Three Generic Strategies
At the point when rivalry emerges in the market, it turns into a quick issue to attempt to decide how you can outperform your opponent organization and augment benefits so as to be better than the opposition. This opposition can take your clients and remove the business from the market. So as to stay away from this and guarantee that the organization actually has the greatest deals even with the opposition around, one needs to follow the three conventional techniques by Porter (Willow, 2018). These procedures depict manners by which the organization can in any case make benefits and keep selling its items and administrations by killing the danger of the contender. These strategies are:
1. Cost Leadership
This cycle includes the technique for limiting expenses with an end goal to increase amount of sales. The methodology is separated into two principle measures. The primary process includes increasing profits by lessening expenses and selling the items at the market’s normal cost. It ought to be noticed that the expense in this value alludes to the expense of payments and purchases made by the organization not the expense by the clients. The organization should attempt however much as could reasonably be expected to limit the expenses of acquisitions made during the monetary year. This should be possible by decreasing the quantity of supplies purchased. The organization could likewise attempt to find another supplier who is less expensive. Different assets could likewise be bought in the short-run to empower the organization to reduce expenses over the long haul. For instance, the organization could buy a few delivery vehicles in the event that it is associated with a ton of transport accordingly reducing transport expenses over the long haul. This will produce in benefit making despite the fact that costs are diminished since the expenses had just been decreased. Lessening costs makes for additional customers to buy the item because of the law of the demand, decline in cost causes an increment in the amount requested. This will result in maximizing profits. Adairs Limited would profit from this methodology on the off chance that they applied it to their business. This will cause them to have an advantage over their rivals such as Furniture’s World and Sterling Furniture (Magretta & Porter, 2017). All together for Adairs Limited to execute this procedure, the organization must have: productive coordination which will be utilized by the organization to figure out where expenses are being used the most and how to cut them, minimal effort based activities, for example, materials, offices, and work, and it ought to approach capital to introduce innovation that will empower them to reduce down the expenses.
2. Differentiation
Differentiation alludes to the idea of making the item diverse as what different contenders are offering by including better style and features. This helps an item in guaranteeing that the item is favored by more clients. For instance, assume the furniture or homeware design has a basic white plain covering while the other organization furnishes a covering with stunning style and included highlights, for example, color blends and quality material or various forms depending on the client. The client will in all likelihood incline toward the styled object despite the fact that the two items are the equivalent. This shows the impact of separation on items in the market. Adairs Limited already utilizes this procedure whenever confronted with the test of rivals in the market which is shown on its elegant homeware designs present both on the covers and software related interactions on both the mobile and web platform (Gentle, 2020). So as to practice differentiation, an organization needs to guarantee that it has top-notch item conveyance with the end goal that the items can be separated from the competitors. The organization additionally must have compelling aptitudes in deals and promoting which will bring up the separation between their item and different contenders and publicize it. The organization ought to likewise have great examination, advancement, and improvement which will help in improving items that can be separated from different competitors.
3. Focus
Focus alludes to the organization remaining reliable with one environment. It very well may be partition into two bits: Differentiation focus and cost focus. It ought to be noticed that this doesn’t imply that the primary spotlight is on the expense and differentiation individually. It implies that the expense of an engaged environment of differentiation that occurs in a centered environment. The best case of the focus is best indicated when an organization is predominant in a specific area and contenders can’t sell their items there because of client loyalty to one organization. The cost focus glances at indicating the expense for the climate relying upon the organization necessities through separation center glances at improving items for that climate. Adairs Limited ought to imitate this in their business so as to have a faithful client rapport. The primary key in setting up in a central market is guaranteeing you add a bonus to what the organization produces and sell with the goal that the clients can pick your item.
Financial Health of the Company
The following are financial ratios for the past two year, that is, 2019 and 2020. The data is obtained from the company records which releases the company financial data after each financial quarter.
Liquidity Ratios
1. Current Ratio
= Current assets / Current Liabilities For Year 2020: =0.82 For Year 2019: =0.79
2. Quick Ratio
= (Current Assets – Inventory – Prepaid expenses) / Current Liabilities For Year 2020: = 0.36 For Year 2019: = 0.32
3. Total Debt to Equity Ratio
For Year 2020: = 99.26% For Year 2019: = 99.32%
Asset Management Ratios
1. Asset Turnover Ratio
= Revenue / Average Total Assets For Year 2020: = 1.31 For Year 2019: = 1.273
Adairs Limited has low liquidity ratios, especially its current ratio (< 1) which means it cannot easily convert its assets to cash. While the total debt to equity ratio is less than 1, it is barely low enough which shows majority of the equity is generated by debts through lenders. It also does not have a great Asset Turnover Ratio (< 2.5) and cannot therefore turnover its assets in case they incur debt.
Financial Analysis
Financial Data is obtained from Yahoo Finance which contains information on the investment data as well as the stock pricing. There are various documents obtained in csv format which are imported into R (Jonathan K. Regenstein, 2018). Tidyquant and tidyverse are also used to import financial data for better analysis. The following steps are taken when performing the analysis:
1. Importing the Data
The first step of beginning the analysis is declaring the libraries to be used in the analysis as well as importing the data by reading it into a dataframe:
#importing the libraries
library(tidyverse)## Warning: package 'tidyverse' was built under R version 4.0.3## -- Attaching packages --------------------------------------- tidyverse 1.3.0 --## v ggplot2 3.3.2 v purrr 0.3.4
## v tibble 3.0.4 v dplyr 1.0.2
## v tidyr 1.1.2 v stringr 1.4.0
## v readr 1.4.0 v forcats 0.5.0## Warning: package 'ggplot2' was built under R version 4.0.3## Warning: package 'tibble' was built under R version 4.0.3## Warning: package 'tidyr' was built under R version 4.0.3## Warning: package 'readr' was built under R version 4.0.3## Warning: package 'purrr' was built under R version 4.0.3## Warning: package 'dplyr' was built under R version 4.0.3## Warning: package 'stringr' was built under R version 4.0.3## Warning: package 'forcats' was built under R version 4.0.3## -- Conflicts ------------------------------------------ tidyverse_conflicts() --
## x dplyr::filter() masks stats::filter()
## x dplyr::lag() masks stats::lag()library(tidyquant)## Warning: package 'tidyquant' was built under R version 4.0.3## Loading required package: lubridate## Warning: package 'lubridate' was built under R version 4.0.3##
## Attaching package: 'lubridate'## The following objects are masked from 'package:base':
##
## date, intersect, setdiff, union## Loading required package: PerformanceAnalytics## Warning: package 'PerformanceAnalytics' was built under R version 4.0.3## Loading required package: xts## Warning: package 'xts' was built under R version 4.0.3## Loading required package: zoo## Warning: package 'zoo' was built under R version 4.0.3##
## Attaching package: 'zoo'## The following objects are masked from 'package:base':
##
## as.Date, as.Date.numeric##
## Attaching package: 'xts'## The following objects are masked from 'package:dplyr':
##
## first, last##
## Attaching package: 'PerformanceAnalytics'## The following object is masked from 'package:graphics':
##
## legend## Loading required package: quantmod## Warning: package 'quantmod' was built under R version 4.0.3## Loading required package: TTR## Warning: package 'TTR' was built under R version 4.0.3## Registered S3 method overwritten by 'quantmod':
## method from
## as.zoo.data.frame zoo## Version 0.4-0 included new data defaults. See ?getSymbols.## == Need to Learn tidyquant? ====================================================
## Business Science offers a 1-hour course - Learning Lab #9: Performance Analysis & Portfolio Optimization with tidyquant!
## </> Learn more at: https://university.business-science.io/p/learning-labs-pro </>library(ggplot2)
library(lubridate)
library(patchwork)## Warning: package 'patchwork' was built under R version 4.0.3# loading the data
ADH <- read.csv("ADH.csv", header = TRUE)
June30th2020 <- read.csv("30-june-2020.csv", header = TRUE)2. Viewing DataFrame Structures
The next step is to identify the data types of the components of the dataframes in order to be able to determine certain aspects during analysis. This is done using the str() command.
str(ADH)## 'data.frame': 1320 obs. of 6 variables:
## $ Date : chr "17/06/2015" "18/06/2015" "19/06/2015" "22/06/2015" ...
## $ Open : num 2.6 2.63 2.75 2.79 2.75 2.75 2.78 2.77 2.77 2.64 ...
## $ High : num 2.68 2.74 2.8 2.79 2.77 2.82 2.8 2.79 2.77 2.73 ...
## $ Low : num 2.57 2.63 2.72 2.74 2.74 2.74 2.78 2.75 2.64 2.61 ...
## $ Close : num 2.65 2.7 2.79 2.77 2.75 2.81 2.78 2.78 2.64 2.66 ...
## $ Volume: int 31891250 1581471 1862272 1663223 895029 634406 155512 101775 225419 2212786 ...str(June30th2020)## 'data.frame': 2271 obs. of 3 variables:
## $ ASX.Code : chr "360" "14D " "1AD " "1AG " ...
## $ Closing.Price: chr "2.04" "0.091" "0.085" "0.039" ...
## $ Last.Trade : chr "20200630" "20200630" "20200630" "20200630" ...3. Formatting the data to allow analysis
The data first needs to be formatted by changing the data types in order to enable it to be analyzed Yahoo Finance (2020). For example, in the ADH and June30th2020 dataframes, the date column is in character data type hence certain analysis cannot be made such as determining factors over a time period.
# converting the data-types to preferable data types
ADH$Date <- as.Date(ADH$Date, format = "%d/%m/%Y")
June30th2020$ASX.Code <- as.factor(June30th2020$ASX.Code)
June30th2020$Closing.Price <- as.numeric(June30th2020$Closing.Price)## Warning: NAs introduced by coercionJune30th2020$Last.Trade <- as.Date(June30th2020$Last.Trade, format = "%Y%m%d")On running the str() command again, it is possible to view the changes:
str(ADH)## 'data.frame': 1320 obs. of 6 variables:
## $ Date : Date, format: "2015-06-17" "2015-06-18" ...
## $ Open : num 2.6 2.63 2.75 2.79 2.75 2.75 2.78 2.77 2.77 2.64 ...
## $ High : num 2.68 2.74 2.8 2.79 2.77 2.82 2.8 2.79 2.77 2.73 ...
## $ Low : num 2.57 2.63 2.72 2.74 2.74 2.74 2.78 2.75 2.64 2.61 ...
## $ Close : num 2.65 2.7 2.79 2.77 2.75 2.81 2.78 2.78 2.64 2.66 ...
## $ Volume: int 31891250 1581471 1862272 1663223 895029 634406 155512 101775 225419 2212786 ...str(June30th2020)## 'data.frame': 2271 obs. of 3 variables:
## $ ASX.Code : Factor w/ 2271 levels "14D ","1AD ",..: 7 1 2 3 4 5 6 8 9 10 ...
## $ Closing.Price: num 2.04 0.091 0.085 0.039 0.85 0.031 0.08 0.14 0.042 0.86 ...
## $ Last.Trade : Date, format: "2020-06-30" "2020-06-30" ...Plotting of Data using Plot()
Plotting of Data helps view how the data is distributed and therefore give a better view and understanding of the whole data.
Volume of Stocks Sold
Analyzing the volume of stocks sold helps view which years had the most volume of stocks sold between 2016 and 2020. The graph is shown below which shows a distributed volume of stocks with certain spikes throughout the period:
# Plotting a histogram using plot()
plot(ADH$Date, ADH$Volume, type = "h",
main = "Volume of Stocks Sold",
ylab = "Volume",
xlab = "Date",
col = "blue")
Plotting of Data using Ggplot()
Ggplot is a package which helps in graphing data better since it has better visualizations and multiple types of graphs. The data above is also graphed with ggplot() to help show it better and a color range for different types of ranges:
# Plotting the volume of stock sold
ADH %>%
ggplot() +
aes(x=Date, y=Volume, color=Close) +
labs(title = "Volume of Stocks Sold",
x = "Volume",
y = "Date") +
geom_line()
Importing Financial Data using Tidyverse and Tidyquant
Tidyquant contains data from Yahoo Finance which can be imported to a certain dataframe for analysis. The package helps to simplify collection of data hence faster analysis.
Tidyquant data importation
The following code shows which data is available for importation using tidyquant:
# Viewing options of data that can be imported
tidyquant::tq_get_options()## [1] "stock.prices" "stock.prices.japan" "dividends"
## [4] "splits" "economic.data" "quandl"
## [7] "quandl.datatable" "tiingo" "tiingo.iex"
## [10] "tiingo.crypto" "alphavantager" "alphavantage"
## [13] "rblpapi"Importing Stock Prices of Adairs Limited
As viewed from the tq_get_options() function, stock prices can be imported. This is done by specifying the name of the company using its market code as shown in the code below:
# Getting stock prices of Adairs Limited
adh_stock_data = tq_get(c("ADH.AX"), get = "stock.prices")
adh_stock_data## # A tibble: 1,357 x 8
## symbol date open high low close volume adjusted
## <chr> <date> <dbl> <dbl> <dbl> <dbl> <dbl> <dbl>
## 1 ADH.AX 2015-06-17 2.6 2.68 2.57 2.65 31891247 1.83
## 2 ADH.AX 2015-06-18 2.63 2.74 2.63 2.7 1581471 1.87
## 3 ADH.AX 2015-06-19 2.75 2.8 2.72 2.79 1862272 1.93
## 4 ADH.AX 2015-06-22 2.79 2.79 2.74 2.77 1663223 1.91
## 5 ADH.AX 2015-06-23 2.75 2.77 2.74 2.75 895029 1.90
## 6 ADH.AX 2015-06-24 2.75 2.82 2.74 2.81 634406 1.94
## 7 ADH.AX 2015-06-25 2.78 2.8 2.78 2.78 155512 1.92
## 8 ADH.AX 2015-06-26 2.77 2.79 2.75 2.78 101775 1.92
## 9 ADH.AX 2015-06-29 2.77 2.77 2.64 2.64 225419 1.82
## 10 ADH.AX 2015-06-30 2.64 2.73 2.61 2.66 2212786 1.84
## # ... with 1,347 more rowsFrom the data it can be clearly viewed that the data has been imported successfully. One can also go through the data to identify the columns and their data types.
Plotting the data
The data imported is very large as viewed above occupying 1357 rows. To have a better understanding of the data, plotting using ggplot() is done.
adh_stock_data %>%
ggplot() +
aes(x = date, y = adjusted, colour = symbol) +
labs(title = "Stock Prices for ADH in 2020",
x = "Years",
y = "Adjusted Stock Price") +
geom_line()
Refining the Plot
The data plotted shows the trend of stock prices as it goes through its highs and lows. However, a better plot should be refined to show a better and shorter range of data. In this case, I applied a filter to show results for the year 2020. As observed below, it can be noted that there was a huge drop in stock prices at around March 2020, which can be viewed as the market drop due to COVID-19 which happened at the same time.
adh_stock_data %>%
filter(date > dmy("01/01/2020")) %>%
ggplot() +
aes(x = date, y = adjusted, colour = symbol) +
labs(title = "Stock Prices for ADH in 2020",
x = "Months",
y = "Adjusted Stock Price") +
geom_line(colour = "blue")
Plotting the data of Adairs Limited + its Competitors
Plotting the stock prices
Plotting this data helps to identify the various stock prices and how the company relates with its competitors who sell the same product. A filter is used to include the last five years only. In the graph below, one can observe that Adairs Limited (ADH.AX) has higher stock prices than Accent Group Limited (AX1.AX) but lower stock prices than Nick Scali Limited. All the companies showed a significant drop at around March 2020 but are currently rising.
# Getting Stock Prices of Adairs Limited + Competitors
all_stock_data = tq_get(c("ADH.AX", "NCK.AX", "AX1.AX"), get = "stock.prices")
# Plotting the data
all_stock_data %>%
filter(date > dmy("01/01/2016")) %>%
ggplot() +
aes(x = date, y = adjusted, colour = symbol) +
labs(title = "Stock Prices for ADH, NCK, and AX1 from 2016 to 2020",
x = "Years",
y = "Adjusted Stock Price") +
geom_line()
In the last two years, that is, 2019 and 2020, one can view that the stock prices of Addairs Limited (ADH.AX) and Accent Group Limited (AX1.AX) have been very close. To better refine this, the code below is used to refine the graph to view closely the two stock prices:
# Getting Stock Prices of Adairs Limited + Competitors
adh_vs_ax1_stock_data = tq_get(c("ADH.AX", "AX1.AX"), get = "stock.prices")
# Plotting the data
adh_vs_ax1_stock_data %>%
filter(date > dmy("01/01/2019")) %>%
ggplot() +
aes(x = date, y = adjusted, colour = symbol) +
labs(title = "Stock Prices for ADH and AX1 in 2019 and 2020",
x = "Months",
y = "Adjusted Stock Price") +
geom_line()
Plotting the Dividend Prices
A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a proportion of the profit as a dividend to shareholders. The plotting of the dividend data helps show which company pays more dividends to its shareholders. From the dividend data, it can be observed that there is a correlation between the stock price and the dividends paid out to the stakeholders. Adairs Limited has higher dividend rates than Access Group Limited but lower than Nick Scali Limited.
# Getting Dividend Data of Adairs Limited + Competitors
dividend_data = tq_get(c("ADH.AX", "NCK.AX", "AX1.AX"), get = "dividends")
# Plotting the data
dividend_data %>%
filter(date > dmy("01/01/2016")) %>%
ggplot() +
aes(x = date, y = value, colour = symbol) +
labs(title = "Dividends for ADH, NCK, and AX1 from 2016 to 2020",
x = "Years",
y = "Dividends") +
geom_line()
Recommendations
I would recommend this company to any investor as the company continues to grow. The company is taking advantage of the technological innovations. The company is using efficient delivery and tracking as well as giving its customers the option of ordering for the products from the website. Adairs Limited seems to manage their finances such a way that the company will always grow when its competitors struggles. This company is in business to make a profit and its profit and market share is increasing as the years progress as viewed in the sales graph at the Financial Analysis section (Singh & Allen, 2018).
The company also has well paying dividends which are a good investment for stakeholders. The financial ratios and graphs show a company that is doing well in terms of caring for its stakeholders. By analyzing the stock prices and graphing them, it is visible that they will continue to rise even with multiple market downfalls, like the one caused by the COVID-19 market fall in February and March 2020.
References
Ang, C. S. (2019). Analyzing Financial Data and Implementing Financial Models Using R. Springer.
Bennett, M. J., & Hugen, D. L. (2018). Financial Analytics with R. Cambridge University Press.
Gentle, J. (2020). Statistical Analysis of Financial Data: With Examples In R. CRC Press.
Hewsbury, L. (2018). Porter’s Five Forces: Understand competitive forces and stay ahead of the competition. 50Minutes.com.
Jonathan K. Regenstein, J. (2018). Reproducible Finance with R: Code Flows and Shiny Apps for Portfolio Analysis. Taylor & Francis Group.
Magretta, J., & Porter, M. E. (2017). Understanding Michael Porter: The Essential Guide to Competition and Strategy. Harvard Business Press.
Miller, F. P., Vandome, A. F., & John, M. (2017). Porter Five Forces Analysis. VDM Publishing.
Porter, M. E. (2018). Competitive Strategy: Techniques for Analyzing Industries and Competitors. CreateSpace Independent Publishing Platform.
Singh, A. K., & Allen, D. E. (2018). R In Finance And Economics: A Beginner’s Guide. World Scientific Publishing Company.
Tsay, R. S. (2019). An Introduction to Analysis of Financial Data with R. Wiley.
Willow, R. (2018). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press.
Yahoo Finance (2020). Retrieved from https://finance.yahoo.com/quote/ADH.AX?p=ADH.AX. Yahoo Finance.