Primark is leading Irish Clothing and Accessories Company which is actually a subsidiary of the AB Food (Primary, 2018). The main purpose of this report is to analysis the financial performance of the Primark Company by examining the financial data by using the Absolute valuation model and relative valuation model.
Absolute valuation model is defined as a business valuation model that is used by the company for analyzing the discounted cash flow (DCF) in order to determine the company’s financial worth value in the competitive market. According to Gregory et al. (2014) absolute valuation model is different from the relative valuation model that helps in examining the financial worth of the company in comparison to its competitors. While studying, it is found that there are different types of absolute valuation model such as discounted cash flow model, discounted residual income model, discounted free cash flow model and discounted asset model, etc.
In concern to this, Primark financial performance is also analyzed on the basis of valuation method which helps in determining the increase in the sales and profit of an organization (Associated British Foods, 2018). Primark Company focuses on raising the sales and growth of the company by contributing 2% in the corporate social responsibility per annum. In addition to this, Primark discounted cash flow valuation is derived to £19bn in comparison to previous year £16bn. This valuation reflects the estimate of cash flow of the succeeding year which company will achieve by meeting the future cash flow.
At the same time, Hirth (2013) also stated that relative valuation model is different from the discounted cash flow models which don’t add value to the firm and also on the assets of the firm. There are different variations observed in the relative valuation model and for that price earnings ratio and book value of the firm is calculated in order to determine the increase in the financial performance of the company. The book value of the firm help in identifying the value of asset which is carried on the balance sheet and also it is calculated on the basis of cost of an asset which is deducted from the accumulated depreciation.
In a similar manner, the book value of Primark identified on the basis of net asset value which is calculated on the basis of total assets minus intangible assets (goodwill, patent) and liabilities (Associated British Foods, 2018). The price earnings ratio is a ratio analysis which indicates the amount which is expected by the investors from the investment in the company. This profit earning ration help in understanding that is price is multiple then it shows how much investor is interested or willing to invest in pay of dollar in earnings (Brown, 2012). In context to it, price earnings ratio of the Primark is falling down by 0.9 % which indicates that investors are less interested or investing less in the company development.
The above study can be concluded that Primark Company focuses on the achieving a growth and high position in the international competitive market for which increase in sales and profit is analyzed or determined to a large extent.
Associated British Foods. 2018. Annual Report. [Online] Available At: https://www.abf.co.uk/documents/pdfs/arcr-2017/abf_ar_2017.pdf (Accessed: 10th April, 2018).
Brown, R., 2012. Analysis of investments & management of portfolios.
Gregory, A., Tharyan, R. and Whittaker, J., 2014. Corporate social responsibility and firm value: Disaggregating the effects on cash flow, risk and growth. Journal of Business Ethics, 124(4), pp.633-657.
Hirth, L., 2013. The market value of variable renewables: The effect of solar wind power variability on their relative price. Energy economics, 38, pp.218-236.
Primary.2018. Home Page. [Online] Available At: https://www.primark.com/en/homepage (Accessed: 10th April, 2018).