Stock analysis for Northwest Natural Gas
...nancial leverage and liquidity with the quick ratio, current ratio, long-term debt to equity, and total debt to equity. NW Natural’s current ratio is 1.12 times while the industries’ is 0.89 times. This is a measure of short-term liquidity. From this measure the company has its current liabilities covered 1.12 times over. This also shows that the company has a higher liquidity than the industry. The industry has a current ratio of less than 1, which can tell you that the industry’s net working capital is negative. NW Natural’s quick ratio is 0.34 times compared to the industry which is 0.43 times. Quick ratio is the same as current ratio except inventory is subtracted from the assets. From the ratios you can tell that NW Natural’s inventory accounts for more than half the assets. Since this is natural gas which is consumed every day, then I would think that this would be normal, and that this kind of inventory is more liquid than other companies in a different industry. To cover the financial leverage I will look at the companies’ long-term debt to equity, since it can be more reliable than a short-term debt. NW Natural’s long- term debt to equity is 0.88 compared to the industries 1.31. This would be a plus side for NW Natural. This shows that they have $0.88 in debt for every $1 in assets. Following the financial leverage, I am going to compare the company’s profitability ratios to the industries’. The net profit margin over a five year average for NW Natural is 9.08% compared to the industries’ 9.46%. From this you can conclude that NW Natural a little more than $9 in profit for every sale, however the industry is making $0.38 more profit than NW Natural. To look at effectiveness, I will compare the return on assets (ROA) and return on equity (ROE). NW Natural, over a five year average, has 3.52 ROA and 9.66 ROE, while the industry has a 3.61 ROA and a 10.77 ROE. As you can see, NW Natural is lower than the industry in this area. This means that NW Natural is making $3.52 in profit for every dollar in asset and $9.66 profit for every dollar in equity. You can clearly tell that the industry is receiving more profit all together than NW Natural. Finally I will discuss this company’s efficiency. Through efficiency I will look at the company’s receivable turnover, inventory turnover, and asset turnover. NW Natural’s receivable turnover is 15.57%. From this you can tell by dividing 365 days by 15.57%, you will find out that on an average NW Natural collects on its credit sales in 23.4 days. Compared to the in...