4 Responses Dec 18

Preethi Work:

Shareholder value is the financial worth owners of a business receive for owning shares in the company. An increase in shareholder value is created when a company earns a return on invested capital (ROIC) that is greater than its weighted average cost of capital (WACC) (Corporate Finance Institute, 2020). It can also be defined as the shareholders' value, which enables the company to grow and increase its profits. An increase in the stockholders' equity section of the balance sheet is an indication of growing shareholder value. If this value is created, particularly over the long term, the share price increases, and the company can pay more enormous cash dividends.

 

          A company's shareholder value depends on its board of directors and senior management's strategic decisions, including the ability to make wise investments and generate a healthy return on invested capital (Hayes, 2020). Revenue growth, increasing operating margin, increasing capital efficiency. Companies can increase revenue by increasing sales, gaining new customers, encouraging returning customers to purchase, and introducing new products and their categories. Besides maximizing revenue, a company that intends on increasing shareholder value should pay close attention to increasing its operating margin, which is the revenue after covering operating and non-operating expenses of a company. One way companies can increase operating margin is by reducing all of their expenses in COGS and SG&A, which are often the largest categories of expenses. Capital efficiency reflects how efficiently a company is deploying its cash in its operations. It is the ratio between dollar expenses incurred by a company and dollars spent to make a product or service, which can be referred to as ROCE (Return on Capital Employed) or the ratio between EBIT (Earnings Before Interest and Tax) over Capital Employed. A higher ROCE indicates a more efficient use of capital to generate shareholder value, and it should be higher than the company's capital cost.

           Shopify (NYSE: SHOP), the e-commerce platform provider, helps small businesses set up shop online and build their brands. Shopify recorded a robust growth of over 47% from the previous quarter. Shopify generates revenue from various services, including payment processing fees (Shopify Payments) and loans to merchants (Shopify Capital). In the last quarter, merchant solutions increased by 57% to $282.4 million (Nasdaq, 2020). Shopify is a tremendous growth company but presents hardly any value for its investors. It can be seen that Shopify's investors are paying almost 60 times sales for a company that does not occupy the first place in its industry. From a valuation perspective, even the most risk-tolerant investors shy away from investing in the company and buying the stock at these levels.

References

Corporate Finance Institute. (2020). Shareholder Value. Retrieved from Corporate Finance Institute: https://corporatefinanceinstitute.com/resources/knowledge/strategy/shareholder-value/

Hayes, A. (2020). Shareholder Value Definition. Retrieved from Investopedia: https://www.investopedia.com/terms/s/shareholder-value.asp

Nasdaq. (2020). 10 Reasons to Buy Shopify Stock and Never Sell. Retrieved from Nasdaq: https://www.nasdaq.com/articles/10-reasons-to-buy-shopify-stock-and-never-sell-2020-06-26

Chandini Work:

Verizon made significant network investments and acquisitions, the company shed non - strategic assets and investments to focus on nationwide wireless, a global enterprise, and wireline broadband services concentrated in Northeast and Mid - Atlantic states  (Tonner, 2016). In all of the 2000s, Verizon sold wireline access lines and spun off of wireline business in multiple states. Not only has Verizon been completing dive statures domestically, but they also participated in international sales with the Dominican Republic, Puerto Rico, and Venezuela. GENERAL OPERATIONS Verizon Wireline voice, data, and video communication products and services include broadband video and data, corporate networking solutions, data centre and cloud services, security and managed network services, and local and long-distance voice services. Verizon offers these products and services to consumers in the United States, as well as to carriers, businesses, and government customers, both, in The United States and around the world (Dybek, 2020). Verizon Wireline segment has three sub-segments: Mass Markets, Global Enterprise, and Global Wholesale. Mass Markets Operations provide broadband services, local exchange and long-distance voice services to residential and small business customers. Global Enterprise offers strategic services and other core communication services to medium and large business customers, multinational corporations, and state and federal government customers. Global Wholesale provides communication services including data, voice, and local dial tone and broadband services primarily to local, long-distance, and other international markets. Verizon provides communication, information, and entertainment products and services to consumers, businesses, and government agencies through two segments, Wireless and Wireline. The Wireless segment off communication products and services, including, wireless voice and data services and equipment sales, to consumer, business and government customers across the United States. The Wireline segment offers voice, data, and video communication product and services, security, and managed network services, and local and long-distance voice services.  The Verizon leadership team blends a history of industry expertise with visionary thinking. Verizon is currently being led by CEO Lowell C. McAdam, who is a leading provider of wireless, fibre - optic, and global internet networks and services. He was named CEO on August 1, 2011, and chairman on January 1, 2012. Before McAdam becoming CEO, he was Verizon Wireless offers a Short - Term Incentive plan that encourages employees to remain working with Verizon. The philosophy of the plan is to provide a percentage on the employee’s total compensation with successful completion of annual goals and individual performance objectives (Specified, 2020). The Short - Term Incentive plan is designed to increase awareness, understanding, and commitment to Verizon Wireless business goals. In 2012, Verizon Communications was ranked No. 1 for having the best training programs for their employees. “Verizon is committed to building a business as good as our networks and to do that we depend on our highly skilled and committed employees,” said Marc Reed, executive vice president and chief administrative officer at Verizon. Verizon uses multiple training techniques that have benefit their employees. For example, the company uses videos, podcasts, blogs, and its enterprise learning management system to deliver crucial information to their employees. They also offer a variety of training in the form of classroom studies to self - directed online training.

 

Reference:

Tonner, A. (2016, October 27). Verizon Stock History: What Investors Need to Know. Retrieved December 17, 2020, from https://www.fool.com/investing/2016/10/27/verizon-stock-history-what-investors-need-to-know.aspx

 

Dybek, M. (2020, February 22). Verizon Communications Inc. (NYSE: VZ): Analysis of Liquidity Ratios. Retrieved December 17, 2020, from https://www.stock-analysis-on.net/NYSE/Company/Verizon-Communications-Inc/Ratios/Liquidity

 

Specified, N. (2020, June 23). Verizon Communications Annual Reports. Retrieved December 17, 2020, from https://www.verizon.com/about/investors/annual-report