Assessment of the value of
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Assessment of the value of a publicly traded corporation s common stock
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The companys managerial efficiency compares well with its industry. The receivables turnover is 7.9 times, compared with an industry average of 7.4 times. Inventory turnover is 22.9 times, compared with an industry average of 12.0 times. Asset turnover is 1.1 times, equal to the industry average. Despite this, Northrop Grumman is not especially profitable compared to its peers. The companys return on equity is 13.3%, compared with an industry average of 30.7%. Northrops return on assets is 5.5%, compared with an industry average of 7.1% and its return on capital is 7.3%, compared with an industry average of 10.2%. These figures combine to indicate that while Northrop Grumman is relatively successful in terms of managerial efficiency and financial effectiveness, it lags its peers in many categories. The company may not be operating in the industrys most profitable sectors, or perhaps its cost controls and pricing power while strong are not as strong as those of its peers
The cash flow statements reveal a couple of interesting things about the financial condition of Northrop Grumman. The companys cash flow from operating activities slumped in 2009. The goodwill writedown in 2008 masked an otherwise successful year for the company,
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