Ratio Analysis and Critical Assessment

Introduction

Worthington Industries has the sole purpose of promoting industrial work. Worthington Industries brings positive change. They increase competition between steel companies of the industry. Worthington's growth, like that of many other large industrial companies, is part of a bigger picture involving the evolution of the economy and the way businesses conduct themselves. Financial Analysis and Valuation

It is quite evident that Worthington Industry is tough to beat if one is looking for stable earnings growth, excellent fundamentals and compelling valuations. It is an excellent proxy to the economic growth. Worthington Industries is unique as a steel works company with almost no similar peers in the country. All other companies in the region have some form of integration (Downstream and upstream), which adds to their earnings volatility due to fluctuating prices.

There are a number of factors at play when it comes to the rise and fall of stock prices on any given trading day.

Investors who are able to grasp what these factors are will be more likely to achieve success when buying and selling stocks in either a bull market or a bear market. Stock market indicators are extremely important in the process of determining the viability of purchasing stocks of a particular company. Investor able to understand what the indicators are saying about a particular firm's stock value or growth prospects will be able to make solid decisions sure to bring in profits over the long term. According to the dictionary, a stock market indicator refers to anything used to project future financial or economic trends. Total shares outstanding times the share price equals Market CapitalizationThe market capitalization represents the price of the entire company. Each share of stock represents only the proportional value of that total price. Market capitalization is important because it allows for comparison to other companies, using price related ratios.

As the government regulates margins for retail companies, it is expected that the major determinant of value for Worthington Industries will be the company's ability to sell additional products. It is hence important to evaluate Worthington Industries use of capital to determine if:The company earns an adequate rate of return, andExisting returns are sustainable or otherwise. Over the last six years, EVA spreads have been positive and substantial. These results are impressive as I have used an aggressive required rate of return on 25%. Is the ROCE Sustainable?

An analysis of returns earned by Worthington Industriesindicates that the company adds value for shareholders. The next logical question is can the company continue to add value by maintaining these returns? In order to answer this question I have computed the ROCE and ROEBreakdown of Return on Equity

Contrary to general perception, Worthington Industriesis an efficient user of capital, including equity capital. This is reflected in handsome returns, which I have attempted to break down into various components to check if they are sustainable.Return on Capital Employed

In order to evaluate Worthington Industriesfrom a broader perspective, I have attempted to reprobate the above analysis with return being earned ...