Bristol- Myers Squibb free essay sample

A Financial Ratio Quarterly Trend Analysis of: Bristol-Myers Squibb Company Stock symbol: BMY Listed on the New York Stock Exchange Introduction: The following report will include provide a financial quarterly trend analysis of Bristol-Myers Squibb Company (BMS) which was founded in 1989, and is based in New York City. This is a publicly traded company on the New York Stock Exchange (NYSE), and their stock symbol is BMY. Bristol-Myers Squibb is currently â€Å"ranked 8th among 500 the largest United States†1 manufacturers. The company is â€Å"engaged in the discovery, development, licensing, manufacturing, distribution and sale of pharmaceutical products on a global basis. †2 The types of medications they produce help â€Å"fight against cancer, cardiovascular disease, diabetes, HIV/AIDS, rheumatoid arthritis and psychiatric disorders. †3 Some of their more widely recognized medications include Abilify, Plavix, Reyataz, Coumadin, and Erbitux. The company is also heavily involved with genomics and biotechnology research and development. I choose to analyze Bristol-Myers Squibb Company for the following reasons: †¢ As an employee of the University of Miami Miller School of Medicine, I am very interested in the national concern regarding the practice of drug companies paying medical school faculty members and private practitioners thousands of dollars to speak about and basically promote their medical products. We will write a custom essay sample on Bristol- Myers Squibb or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page This is recognized as a blatant conflict of interest and has even been described as corruption. As the 8th largest U. S. pharmaceutical company, Bristol-Myers Squibb participates in this practice. With the passing of the new Healthcare Reform Bill, the healthcare industry is going to be affected tremendously and the general public is and has been very concerned with the costs of medication. †¢ Currently, there are major advances and discoveries being made in genomics and biotechnology. These are two areas in which Bristol-Myers Squibb is expanding their operations. †¢ I’d also like to know more about this company because I’ve considered a job opening with a local pharmaceutical company and would like to know more about this industry. Using Market Watch, The New York Times, and Yahoo! Finance websites, I was able to find closely corresponding financial information. In addition, since one of Bristol-Myers largest competitors is GlaxoSmithKline PLC (NYSE symbol GSK. L) I used this company as an industry standard for the Financial Trend Comparison. Section A: Computations I was able to obtain the last four quarterly Income Statements, Balance Sheets, Cash Flow Statements and trading information for Bristol-Myers Squibb and GlaxoSmithKline which included Quarter 4 2009, Quarter 1 2010, Quarter 2 2010, and Quarter 3 2010). Although BMY’s fiscal year ends in December, there was incomplete information covering the latest quarter. Instead, I used the last four quarters in which I could gather complete data for all the financial statements this included December 2009, March 2010, June 2010, and September 2010). I found my financial data using the following internet sources: †¢ Yahoo! Finance[1] †¢ NYT, The New York Times[2] †¢ Market Watch[3] †¢ Bloomberg[4] †¢ Morningstar5 The two sites that I found with the most similar financial data were Market Watch and The New York Times. However, I was able to correspond much of the data from Bloomberg as well. Using the Income Statement, Balance Sheet, and Cash Flow Statements, I was able to complete the Excel template which provided me with the following financial rations for BMY and Pfizer. The spreadsheets for both companies are attached at the back of this report. The following table summarizes the results of the ratio computations for BMY: BMY: KEY FINANCIAL RATIOS |Liquidity Ratios |Q1 |Q2 |Q3 |Q4 |ANNUAL | |Current Ratio |2. 21 |2. 08 |2. |2. 29 |2. 29 | |Quick Ratio |1. 99 |1. 87 |1. 98 |2. 07 |2. 07 | |Net Working Capital Ratio |. 25 |. 21 |. 23 |. 25 |. 25 | |Current Liabilities to Inventory Ratio |4. 47 |4. 69 |4. 67 |4. 59 |4. 59 | |Cash Ratio |1. 22 |. 85 |1. |1. 21 | 1. 21 | |Operating Ratio |2. 81 |2. 27 |2. 2 |2. 13 |2. 34 | |Asset Ratios |Q1 |Q2 |Q3 |Q4 |ANNUAL | |Inventory Turnover Ratio |3. 11 |3. 09 |3. 09 |3. 01 |12. 16 | |Fixed Assets Turnover Ratio |. 30 |. 26 |. 26 |0. 7 |1. 11 | |Total Assets Ratio |. 16 |. 16 |0. 16 |0. 15 |. 61 | |Asset to Equity Ratio |2. 09 |2 . 02 |2. 02 |2. 00 |2. 00 | |Profitability Ratios |Q1 |Q2 |Q3 |Q4 |ANNUAL | |Return on Assets Ratio |0. 26 |0. 02 |. 03 |. 03 |. 4 | |Return on Equity Ratio |. 55 |. 05 |. 06 |. 06 |. 70 | |Profit Margin Ratio |1. 59 |. 15 |. 19 |. 20 |. 55 | |Basic Earnings Power Ratio |. 04 |0. 05 |. 05 |. 05 |. 19 | |Earnings per Share Ratio |4. 68 |. 43 |. 54 |. 55 |6. 1 | |Debt Ratios |Q1 |Q2 |Q3 |Q4 |ANNUAL | |Total Debt Ratio |. 52 |. 5 |. 5 |. 5 |. 5 | |Interest Coverage Ratio |30. 70 |44. |49. 75 |42. 47 |40. 95 | |Debt/Equity Ratio |1. 09 |1. 02 |. 98 |1. 0 |1. 0 | |Loan to Value Ratio |1. 1 |1. 26 |1. 32 |1. 37 |1. 37 | |Market Ratios |Q1 |Q2 |Q3 |Q4 |ANNUAL | |Earnings per Share (EPS) Ratio |4. 68 |. 43 |. 54 |. 55 |6. 21 | |Price to Earnings Ratio |1. 85 |20. 5 |16. 90 |16. 84 |1. 5 | |Price to Cash Flow Ratio |11. 28 |-5. 98 |20. 1 |9. 61 |13. 16 | |Payout Ratio |. 08 |. 74 |. 60 |. 58 |. 21 | Section B: Financial Trend Comparison 1. Liquidity: Bristol- Myers Squibb has higher ratios in Current Ration, Quick Ratio, Networking Capitol Ration, Cash Ratio, and the lowest Operating Ration. Therefore has more liquidity than Pfizer. 2. Asset Utilization: MBY utilizes it assets more efficiently too. It has higher ratios in Inventory Turnover, Fixed Assets Turnover, and Total Assets Turnover. 3. Profitability: All of the profitability ratios for BMY are higher than their competitor (PFE) including, Return on Assets, Return of Equity, Profit Margin, Basic Earnings Power and Earnings per share. 4. Debt Utilization: BMY also had the advantage in Debt Utilization which included Total Debt Ratio, Interest Coverage, Debt/Equity, and Loan to Value Ration. 5. Market Values: Other than Price to Earnings Ratio, BMY score significantly better in Market Value Ratios which included Earnings per share, Price to Cash Flow, and Payout Raito. Section C: Comparative Financial Analysis to Industry Performance KEY FINANCIAL RATIOS: BMY vs. Pfizer Liquidity Ratios |Desired Value |   |Q1 |Q2 |Q3 |Q4 |Annual |Superior Performer |Similarity of trend pattern | |Current Ratio |HIGH |BMY |2. 21 |2. 08 |2. 2 |2. 29 |2. 29 |v |Distinct | | | |PFE |1. 66 |1. 93 |2. 07 |2. 24 |2. 24 | | | |Quick Ratio |HIGH |BMY |1. 99 |1. 87 |1. 98 |2. 07 |2. 07 |v |Similar (except for Q2) | | | |PFE |1. 32 |1. 53 |1. 69 |1. 87 |1. 87 | | | |Net Working Capital Ratio |HIGH |BMY |. 25 |. 21 |. 23 |. 25 |. 25 |v |Distinct | | | |PFE |. 11 |. 12 |. 14 |. 16 |. 16 | | | |Current Liabilities to Inventory Ratio |LOW |BMY |4. 47 |4. 69 |4. 67 |4. 59 |4. 59 | |Distinct | | | |PFE |3. 0 |2. 56 |2. 59 |2. 76 |2. 6 |v | | |Cash Ratio |HIGH |BMY |1. 22 |. 85 |1. 0 |1. 21 |1. 21 |v |Similar over entire year | | | |PFE |. 05 |. 07 |. 08 |. 09 |. 09 | | | |Operating Ratio |LOW |BMY |2. 81 |2. 27 |2. 2 |2. 13 |2. 34 |v |Similar (Q2-Q4) | | | |PFE |54. 87 |3. 66 |3. 87 |10. 23 |6. 51 | | | |Asset Ratios |Desired Value |   |Q1 |Q2 |Q3 |Q4 |Annual |Superior Performer |Similarity of trend pattern | |Inventory Turnover Ratio |HIGH |BMY |3. 11 |3. 09 |3. 09 |3. 1 |12. 16 |v |Similar (Q2-Q4) | | | |PFE |1. 99 |2. 34 |2. 53 |2. 49 |10. 30 | | | |Fixed Assets Turnover Ratio |HIGH |BMY |. 30 |. 26 |. 26 |. 27 |1. 11 |v |Similar (Q2-Q4) | | | |PFE |. 11 |. 12 |. 2 |. 12 |. 49 | | | |Total Assets Ratio |HIGH |BMY |. 16 |. 16 |. 16 |. 15 |. 61 |v |Similar (Q2-Q4) | | | |PFE |. 08 |. 09 |. 09 |. 08 |. 34 | | | |Asset to Equity Ratio |HIGH |BMY |2. 09 |2. 02 |2. 02 |2. 00 |2. 0 | |Similar over entire year | | | |PFE |23. 62 |2. 18 |2. 21 |2. 18 |2. 18 |v   | | |Profitability Ratios |Desired Value |   |Q1 |Q2 |Q3 |Q4 |Annual |Superior Performer |Similarity of trend pattern | |Return on Assets Ratio |HIGH |BMY |. 26 |. 02 |. 03 |. 03 |. 34 |v |Similar (Q2-Q4) | | | |PFE |. 01 |. 02 |. 02 |. 01 |. 05 | | | |Return on Equity Ratio |HIGH |BMY |. 55 |. 05 |. 06 |. 06 |. 70 |v |Similar (Q2-Q4) | | | |PFE |. 8 |. 04 |. 05 |. 02 |. 13 | | | |Profit Margin Ratio |HIGH |BMY |1. 59 |. 15 |. 19 |. 20 |. 55 |v |Distinct | | | |PFE |. 05 |. 12 |. 14 |. 05 |. 09 | | | |Basic Earnings Power Ratio |HIGH |BMY |. 04 |. 05 |. 05 |. 05 |. 19 |v |Similar over entire year | | | |PFE |0 |. 02 |. 02 |. 01 |. 04 | | | |Earnings per Share Ratio |HIGH |BMY |4. 68 |. 43 |. 54 |. 55 |6. 21 |v |Distinct | | | |PFE |. 1 |. 25 |. 31 |. 11 |. 77 |   | | |Debt Ratios |Desired Value |   |Q1 |Q2 |Q3 |Q4 |Annual |Superior Performer |Similarity of trend pattern | |Total Debt Ratio |LOW |BMY |. 52 |. 5 |. 5 |. 5 |. 5 |v   |Similar over entire year | | | |PFE |. 58 |. 4 |. 55 |. 54 |. 54 | | | |Interest Coverage Ratio |HIGH |BMY |30. 7 |44. |49. 75 |42. 47 |40. 95 |v   |Similar over entire year | | | |PFE |. 01 |0 |0 |0 |11. 52 |   | | |Debt/Equity Ratio |DEPENDS |BMY |30. 70 |44 |49. 75 |42. 47 |40. 95 |v   |Similar over entire year | | | |PFE |13. 64 |1. 18 |1. 21 |1. 18 |1. 18 | | | |Loan to Value Ratio |LOW |BMY |1. 21 |1. 26 |1. 32 |1. 37 |1. 37 |v  Ã‚   |Similar (Q1-Q3) | | | |PFE |1. 54 |2. 15 |1. 88 |2. 01 |2. 01 | | | |Market Ratios |Desired Value |   |Q1 |Q2 |Q3 |Q4 |Annual |Superior Performer |Similarity of trend pattern | |Earnings per Share (EPS) Ratio |HIGH |BMY |4. 68 |. 43 |. 54 |. 55 |6. 1 |v   |Distinct | | | |PFE |. 1 |. 25 |. 31 |. 11 |. 77 | | | |Price to Earnings Ratio |HIGH |BMY |1. 85 |20. 5 |16. 90 |16. 84 |1. 5 | |Distinct   | | | |PFE |11. 78 |44. 27 |34. 91 |101. 18 |14. 28 |v   | | |Price to Cash Flow Ratio |HIGH |BMY |11. 28 |(5. 98) |20. 1 |9. 61 |13. 16 |v   |Distinct | | | |PFE |(4. 01) |(409. 56) |732. 28 |293. 04 |(42. 57) | | | |Payout Ratio |DEPENDS |BMY |. 08 |. 74 |. 60 |. 58 |. 21 |  v   |Distinct   | | | |PFE |0 |0 |0 |0 |0 |   | | |Beta |Desired Value |   |   |   |   |   |Current |Superior Performer |Similarity of trend pattern | |Beta |LOW |BMY |   |   |   |   | | |   | | | |PFE |   |   |   |   | |   |   | | Section D: Comparative SWOT Analysis Results of the SWOT analysis for Bristol-Myers Squibb are detailed in the following sections: 3. 1Strengths: BMY is more liquid than PFE and in today’s economy that’s an advantage and strength. There is not a drastic difference but it is none the less an important factor. 3. 2Weaknesses: The state of â€Å"weak economies, pricing pressure from European governments, the effect of U. S. health-care overhaul, and tough regulations†4 will have negative impacts on the drug manufacturing industry in general. 3. 3Opportunities: New research and development in genomics and bio-technology are advancing rapidly. If BMY continues to keep increasing its revenue, cash ratio, and return on equity, they will be positioned well for further human genomic research and the development of new medications with new patients. 3. 3Threats: BMY will soon be â€Å"hit by hard by patent expirations in 2012. † And they expect that to have a substantial hit to the company because other drug companies will then start making and supplying the market with generic medications. Section E: Business Ethics †¢ Is there a well defined code of ethics or code of conduct? Is there evidence of continued and repeated emphasis by the Board of Directors or the CEO, of the importance of ethical conduct to the corporation and its business ventures? †¢ What processes are in place (if any) that make it safe and easy for employees or other interested parties to report ethical lapse? Section F: Conclusions and Decisions Question 1: W ould you place a personal deposit of $1 million or more in the publicly traded stock of this company? Yes, because they have liquidity, and increasing profitability ratios. Question 2: Would you invest $500,000 in the debt (bonds) of this company? Yes, because their total assets are much larger than their total liabilities. Also, their retained earnings are increasing as they continue to grow the company. Question 3: Would you grant a $1 million line of credit for overnight or term federal funds to this company? No, because their loan to equity rate if high. Section G: Bibliography [5] Yahoo! Finance, http://finance. yahoo. com/q/bs? s=BMYannual 2 Bristol-Myers Squibb Company Website: http://www. bms. com/ourcompany/Pages/home. aspx 3 Bristol-Myers Squibb Company Website: http://www. bms. com/ourcompany/Pages/home. spx 4 New York Times, ttp://www. nytimes. com/2010/10/27/business/27pharma. html? ref=bristolmyerssquibbcompany 5 Market Watch, http://www. marketwatch. com/investing/Stock/BMY/financials/balance-sheet/quarter 6Bloomberg, http://www. bloomberg. com/apps/quote? ticker=BMY:US#chart 7 Morningstar, http://financials. morningstar. com/ratios/r. html? t=BMYregion=USAculture=en-us 8 NYT,http://markets. on. nytimes. com/res earch/stocks/fundamentals/financials. asp? symbol=type=bsperiod=q 9 Yahoo! Finance, http://finance. yahoo. com/q/bs? s=BMYannual