Financial Analysis for Alamo Group

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FINANCIAL ANALYSIS FOR ALAMO GROUP Company Overview Alamo Group is profitable company this is per its net profit for each year and from its earnings per share. Also its earnings growth rate is relatively high {11%}. The company is stable as it has consistency in the growth of its earnings and assets and a consistent reduction of its expenses and liabilities. The gross profit margins each year are above 20%, this shows that the company is in a highly competitive industry. From its balance sheet it’s clear that the company is able to put its liabilities in check hence it has no gearing and liquidity problems. Through it cash flows one is able to derive the fact that the management has control over its cash spending. Ratio Analysis The return on invested capital ratio (ROIC) in the current year is lower than the cost of capital this shows that there is a decline in the production of wealth through the invested capital. Though there has been a consistent growth of the ROIC, this shows an increase in the company’s wealth. The book value per share of Alamo group is lower than its market share showing that the shares are overvalued. Though there is a consistent growth in the company’s book value showing that its future is good. There is consistent growth in the earnings per share of the company. This shows that even in the increase of its shareholders there is low dilution of its earnings meaning that they are increasing. There is an increase in the consistent growth in the sales though the increase is low in the fourth year this shows stability. There is a steady increase in the profitability ratios for example the gross profit margin thus one can draw the assumption that there is an increase in the profitability. The interest coverage is reducing steadily, the company from 2009 is paying its interest in less than 3years hence it’s a durable competitive

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