The EBITDA shows the amount of earnings available to a company before accounting for tax, depreciation, interest and amortization. Often, a large value indicates that an organization has a lot of intangible assets available for depreciation and amortization. A comparison of Rolls Royce EBITDA with the competitors show that it has a small amount of acquired of intangible assets. Creditors and suppliers would not be attracted to Rolls Royce since it is an indication that the company does not have adequate earnings before interest. It is likely that the company has a small value in terms of intangible assets. In the same industry, BAE Systems has the largest EBITDA while Rolls Royce has the least. Therefore, it is arguable that if Rolls Royce has equivalent intangible assets, then it is likely that it performs poorly. On the other hand, if Rolls Royce does not have equivalent intangible assets, then it implies that the company has less intangible assets compared to the competitors.
EV/ EBITDA is a valuation ratio that puts into consideration the debt of the company, unlike P/E ratio. A low ratio indicates a likelihood of the company being undervalued. A comparison of Rolls Royce with the competitors indicates that the company has been outperformed by the competitors. The high EV/ EBITDA in Rolls Royce indicate a possibility of over valuation compared to the competitors. In terms of takeover, it is not easy to take over Rolls Royce since it has a high EV/EBITDA. Investors prefer companies with lower ratios.
EV/ REVENUE is a valuation ratio that compares the actual price that an investor would be willing to pay with the earnings generated by a company. The high EV/REVENUE ratio in Rolls Royce implies that the company is potentially overvalued compared to the competitors. On the other hand, Boeing Company is the lowest which implies that the company is potentially undervalued. This means that investors would be willing to invest in Boeing Company rather than Rolls Royce since the lower the ratio, the better.
Return on Asset ratio indicates how profitable a company is. It indicates how the management is efficient in utilizing the assets in generating earnings. A comparison of Rolls Royce with the competitors indicates that its ability of utilizing the assets in generation of earnings is not as high as United Technologies and Boeing Company. Therefore, Rolls Royce outperforms EADS and BAE Systems, but underperforms compared to United Technologies and Boeing Company.
Return on Asset ratio measures the ability of an organization in utilizing the shareholders funds in generating earnings. A high ratio indicates profitability. Analysis of the competitors of Rolls Royce indicates that Boeing is a better performer than Rolls Royce while Rolls Royce performs better than the rest of the companies.
Profit margin ratio indicates the amount of money for every given dollar of sales that a company archives in earnings. It is worth mentioning that the higher ratio the better as it indicates profitability. A comparison of Rolls Royce with the competitors shows that Rolls Royce outperformed all the competitors, and it is evident that the company makes profits out of sales made by the company.
In conclusion, Rolls Royce shows a commendable performance, and when compared with the competitors, there is no need to worry. However, Rolls Royce should develop strategies meant to improve performance in the company in order to outperform Boeing Company.
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