Can you help me to answer the below questions with attached

Can you help me to answer the below questions with attached data - thanks

Financial Ratios for FedEx Corp Financials

FED EX

2015-05

2016-05

2017-05

2018

Earnings Per Share USD

3.65

6.51

11.07

16.39

Dividends USD

0.8

1

1.6

1.9

Payout Ratio % *

6.9

26.3

20.4

11.5

Shares Mil

287

279

270

72

Book Value Per Share * USD

56.69

53.96

56.6

70.71

Earnings Yield

4.5

6.5

6

3.44

Price Earnings Ratio

18.99

38.37

27.28

13.61

Market Caps(Billions)

48

34

50

61

-5- Develop a specific recommendation, with supporting rationale for your client, as to whether the assigned company\'s recent trend in financial and stock performance is of sufficient financial strength to warrant entering in a long-term investment in bonds and/or stocks of the company. Explain your answer (about 1 page) (10% of the project grade).

-6- Develop a specific recommendation, with supporting rationale for the COMPANY’S management - Think about the financial strategy of the company, how to best balance THE COMPANY’S financial leverage to optimize shareholder wealth going forward taking into consideration the company\'s current market position, credit rating, dividend policy, etc.  (10% of the project grade).

Solution

I would recommend not to enter into long term investment in bonds or stocks of the company because:
1. The Earnings per share even though they have increased over the 3 years they are well below industry benchmark. Moreover, the no of shares outstanding has also decreases which might have an impact in the increase earnings per share without any high increase in earnings.
2. The dividend and dividend pay-out ratio is increasing which indicates the retention ratio is decreasing and hence the growth will decrease in the near future. Growth = Return on Equity * (1-duvidend pay-out ratio). Higher the pay-out ratio lower is the growth. The industry benchmark is way lower.
3. Book Value per share is low with respect to the benchmark so in case of liquidation it will be difficult to recover the amount for the shareholders and hence making the investment very risky.
4. The earnings yield has shown favourable increase with respect to the benchmark. This has been the only bright thing about the company.
5. (P/E ratio) is very high indicating that the firm is overpriced as compared to it peers in the industry. High P/E makes it less attractive as appreciation of stock will not be very high and even may fall leading to losses in the investment.

As per Chegg Policy only 1 answer can be given at a time

Best of Luck. God Bless