Why Alibaba?
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Transcript of Why Alibaba?
Arijeet|Akash|Aman|Dhruv|Konark|Monica
WHY ALIBABA? Only big Non-U.S. E-commerce giant Fastest growing e-commerce Company in the world One of the biggest innovators in cutting cost. Competitors Amazon, eBay
80%Of China’s online
market is dominated by Alibaba
WHY ALIBABA?
VS VS • Founded in 1995, Campbell,
California, United States
• Released IPO at a valuation of USD
$63 Million in 1998
• Online platform for sale of goods
and services for and by individuals
• PayPal, Skype, Craiglist are
subsidiaries.
• Founded in 1999, Hangzhou,
China
• Released IPO in September
2014 in US at a valuation of
USD $21.8 Billion
• Acts as middleman between
buyers and sellers through its
network of websites• Taobao.com, Tmall, Alipay
• No Inventory
• Founded in 1994, Bellevue,
Washington, United States• Released IPO at a valuation of USD
$54 Million in May, 1997
• Indulges in both direct selling of goods
and provides online platform for other
retailers to sell products
• Kindle, e-book are other sources of
revenues
• Has its large network of warehouses
for inventory
*sources NASDAQ and NYSE
ProfitabilityAmazon Ebay Alibaba
USD million $Dec'14 Dec'13 Dec'12 Dec'14 Dec'13 Dec'12 march'14 March'13 March'12
Gross Profit 26236 20271 15122 12170 11011 9856 39135 24798 13471Net Sales 88988 74452 61093 17902 16047 14072 52504 34517 20025Gross Profit Margin 29.48% 27.23% 24.75% 67.98% 68.62% 70.04% 74.54% 71.84% 67.27%
Income From Operations 178 745 676 3514 3371 2888 24801 10506 4944Operating Profit Margin 0.20% 1.00% 1.11% 19.63% 21.01% 20.52% 47.24% 30.44% 24.69%
Net Income -241 274 -39 46 2856 2609 23315 8532 4228Total Stock holders equity 10741 9746 8192 19906 23647 20865 39739 10509 31518ROE -2.24% 2.81% -0.48% 0.23% 12.08% 12.50% 58.67% 81.19% 13.41%
Total Assets 54505 40159 32555 45132 41488 37074 111549 63786 47210ROA -0.44% 0.68% -0.12% 0.10% 6.88% 7.04% 20.90% 13.38% 8.96%
Interest 210 141 92 0 0 0 358.53 250.28 10.66EBIT 99 647 636 3531 3466 3084 5658 4663 1880Degree of Financial leverage -0.89 1.28 1.17 1.00 1.00 1.00 1.01 1.02 1.00
% Change in EBIT -84.70% 1.73% 1.88% 12.39% 21.34% 148.03%% Change in Sales 19.52% 21.87% 11.56% 14.03% 52.11% 72.37%Degree of Operating Leverage -4.34 0.08 0.16 0.88 0.41 2.05 Combined Leverage 3.87 0.10 0.16 0.88 0.42 2.10
COMPARING PROFITABILITY AND LEVERAGES:
2014 2013 2012
74.5
4
71.8
4
67.2
7
67.9
8
68.6
2
70.0
4
29.4
8
27.2
3
24.7
5
GROSS PROFIT MARGIN
Alibaba Ebay Amazon
2012 2013 20140
10
20
30
40
50
Operating Profit Margin
Alibaba Ebay Amazon
FINDINGS:
• Alibaba have higher gross profit margins, operating profit margin , ROA and ROE, thus it is more profitable than EBay an Amazon.
• It is primarily due to high profits they make by their business. • The interesting fact is that Amazon net revenue is more than Alibaba’s but still their
profit margins are low.• If we see leverage, then also Alibaba is the least risky company among the three.• By 2017 Alibaba would take over Amazon in revenue too.
22.82%
15.45%
56.54%
INVENTORY TURNOVER
AVERAGE COLLECTION AND PAYMENT PERIOD
OPERATING EXPENSE RATIOCost Efficiency
2011 2012 2013 2014
10.72
10.05 10.13
9.63
AMAZON'S INVENTORY TURNOVER DAYS
INVENTORY TURNOVER
AMAZON’S AVERAGE INVENTORY TURNOVER OF 10.13
ALIBABAJUST IN TIME APPROACH NO INVENTORY POLICY
INVENTORY TURNOVER
AVERAGE CASH COLLECTION
DAYS80.84
AVERAGE CASH COLLECTION
DAYS21.99
AVERAGE CASH PAYMENT DAYS
19.84
AVERAGE CASH PAYMENT DAYS
103.12
2011 2012 2013 2014
6.41%
95.90%
78.23%
69.02%
2.94% 6.27% 6.96%14.03%
PERCENTAGE OF DEBT
ALIBABA AMAZON
2011 2012 2013 2014
0.75310861423221 0.695628241156532
0.527635989638885
0.701905411789407
0.982070428687314
0.988934902525658
0.989993552893139
0.997999730300715
0.789508782017998
0.794769755542922
0.789929581853306
0.803709082784047
ALIBABA AMAZON ebay
ALIBABA HAS LOWEST OPERATING EXPENSES THROUGHOUT THESE
OPERATING EXPENSE/ TOTAL REVENUE
LOW EXPENSE HIGH PROFIT
OPERATING EXPENSE RATIO
Cost effectiveness should be a priority
Good inventory
management can make
the difference
High leverage high risk
KEY LEARNINGS