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Hi, need to submit a 2000 words paper on the topic Strengths and Weaknesses of Louis Vuitton Moet Hennessy.
Hi, need to submit a 2000 words paper on the topic Strengths and Weaknesses of Louis Vuitton Moet Hennessy. The company maintains a good relationship with its stakeholders as well as employees by establishing important policies and procedures for their development. It is LVMH’s responsibility to ensure that labor standards and the company’s supplier code of conduct are respected by the suppliers. Whenever improvements are required, supplier audits are conducted and corrective actions are taken. The company has an advantage in the supply chain that entails lower risk, which is a result of good vertical integration. Through a well-strategized system of advertising, it has remained to maintain its lead in fashion. The company strongly believes in maintaining quality and creating a brand image through innovation.
Company Strengths and Weaknesses:
LVMH’s financial performance from 2009 to 2011:
Return on Common Equity Ratio:
This ratio measures the achievement of an organization in generating profit for the advantage of common stockholders. It is calculated by dividing the net income obtainable for common stockholders by their common equity. It is calculated as follows:
“Return on Common equity = (net profit - preferred share dividends) / (shareholders equity- preferred shares)” (Return on Common Equity Ratio n.d.).
Dividend Payout Ratio:
This is the number of dividends paid to stockholders in relation to the amount of total net profit of an organization. The amount that is left after paying dividends to stockholders is kept aside by the firm for development. This amount that is reserved by the firm is called retained earnings. It is calculated as follows:
“Dividend Payout Ratio = Dividend per Share / Earnings per Share (EPS) x 100%” (Dividend Payout Ratio n.d.).
Interpretation:
Return on equity shows the company’s profitability in terms of how much the company has earned from the investment made by common stock owners. It is a measurement of efficiency more than a measurement of profit. In 2011, return on equity for LVMH was 350.93%, which is a higher percentage than it was in the year 2009 and 2010, as shown in the table. Payout ratio here is 41.47% which is below 100% and it means that the business has grown rapidly and that it has a lot of opportunities for expansion, thus the reason for payout ratio to below. Both returns on equity and dividend payout ratio show a better condition in the year 2011 as compared to previous years.
Comparison between the P/E Ratio of LVMH with the P/E Ratios of its Competitors:
The P/E ratio is the best-identified indicator of investment valuation. This ratio has its imperfections, however, it is the most broadly reported and used valuation by professionals in the investment field as well as the investing public. The monetary reporting of the industries and investment research facilities utilize basic earnings per share (EPS) divided into the present stock price to compute the P/E multiple. Generally, a high P/E states that shareholders are expecting high earnings in the future contrast to industries with a lesser P/E ratio. This ratio is used to evaluate the P/E ratios of one organization to other firms of the same industry, to the market generally or to the organization’s own past performances. It will not be helpful for shareholders utilizing the P/E ratio as a base for their savings to evaluate the P/E of a technology organization to a utility organization as every industry has different development prospects.
