The current ratio, comparing the current assets to the current liabilities in a company, was 0.95 in 2007, decreasing gradually from 2004. It is generally recommended that this ratio is 1 or higher, however, 0.95 is a value close to that, giving a good reflection of the company's short-term financial viability. This is also important because any liquidity problems can then translate into bigger medium and long-term financial problems.
The financial leverage of the company, along with the debt to equity ratio, has, however, increased significantly from 2005 to 2007. In 2005, the financial leverage was 1.98 and the debt to equity ratio 0.40, while in 2007, the financial leverage was 2.91 and the debt to equity ratio 0.93. This shows that the company is starting to rely from on bank credits and debt rather than on financing its actions from the shareholders' equity. The financial leverage may be too high if one considers the other financial indicators of the company, especially the profitability indicators. The overall reasonably high asset management ratios may show, however, the company's capacity to pay its debt and not affect financial stability.
Stock Performance
While the financial performance reflects an internal evaluation of the organization, the stock performance shows the perception of the company on the market. This report will analyze both the company's stock performance and its performance with regard to the industrial averages.
The total returns of the Sprint Nextel stock has had negative and decreasing returns throughout the period 2005 -- 2007, a trend that is noticeable in 2008 as well, when the total returns for the company stock was -86.1%. In part, this can be explained through the general behavior of the market and the industry. As such, the industry average has had negative values from 2004. The trend is even clearer if one considers the S&P 500, with a decrease of -33.5% in 2007 and -47.6% in 2008. However, despite the obvious...
From 0.5 and 0.3 in 2005 and 2006 respectively, the dividend has decreased to 0.1 in 2007, bring the yield down to 0.53%. Additionally, the price of the Sprint Nextel share has also decreased more than the industrial average, if compared to the values of this price on a 1-year or 5-year average. As such, the current monthly average is 83.88% below the 5-year high and 58.20% lower than the 52-week high. Both these figures shows how the company is underperforming.
Recommendations
Sprint Nextel is currently in a difficult situation, characterized by low profitability and bad stock performance. The cost of the goods sold has increased, while the overall revenues of the company have subsequently decreased. The financial leverage of the company has increased as well, probably because the shareholders' and investors confidence in the company has decreased, because of its performances, which means the company needs to borrow from banks rather than by selling its shares. The only potential positive aspect could come from the asset management efficiency, all the indicators analyzed in this category having average or positive values.
The stock performance has been similarly bad and even below the industry averages. It is definitely a challenging economic time, but the performance of the Sprint Nextel stock has been lower than the industry average and below the S&P 500. This shows a decrease in the confidence of investors to purchase the company's share, a trend that may continue in the future, given the values of the internal indicators.
As a result, the performances of the company show that it is not a company to justify a long-term…
