Financial Performance Analysis Of SEEK LIMITED For Investment Decision-Making

Gross Margin

The report is here is to analyse the financial position and performance of SEEK LIMITED so as to help the investor in making investment decision. SEEK is a top 100 company listed on Australian Securities Exchange. The company is in the business of online recruitment service provider. It was founded in 1997 in Australia with business operation spanning in 16 countries. The analysis here will be covering various components of financial statements and various significant ratios for the business. It is an attempt to cover internal and external factors that might have an impact on the business performance.

Gross Margin: The Company’s gross margin improved from 2012 to 2015 but it has been declining since. There is increase in direct cost of services still the company and the gross margin has declined over the years.

Return on Equity: It can be defined as the return which is expected on the investments which are made on equity share capital (Heikal, Khaddafi and Ummah, 2014). The company has a strong ROE position at 17.75% but has declined over the years.

Asset Turnover ratio: There has been a steady decline in asset turnover ratio implying that the company is not employing the assets efficiently. Higher assets turnover ratio is more favorable as it then shows that the business is using the assets effectively (Delen, Kuzey, and Uyar, 2013).

Debt/Equity ratio:

There has been reduction in debt-equity ratio over time

Below is the list of key ratios for the company.

SEEK was founded in Australia in 1997. The company’s growth since foundation can be defined in four phases (1. ANZ online employment marketplace; 2. International online employment marketplace and education; 3. Talent sourcing/placements; 4. Human Capital management). It now has operations in 16 countries. In 2017, the revenue in ANZ Employment and Zhaopin has increased by 14% and 13% respectively with EBITDA growth of 11% and 0% respectively. Whereas, the revenue has declined in SEEK Asia and Brasil Online by 1% and 5% coupled with reduction in EBITDA margins. This clearly indicates the company is not able to perform on international front. Substitutes to SEEK within this industry are quite limited but slowly growing. Printed media is slowly fading as the market turns more towards digital advertisements, thus giving the rise of other digital competitors.

SEEK has developed its aggregate obligation levels over the most recent a year, from AU$825.90M to AU$969.90M – this incorporates both the present and long haul obligation. With this development, SEEK as of now has AU$730.10M staying in real money and here and now speculations for putting into the business. Moreover, SEEK has produced money from activities of AU$280.40M over the most recent a year, prompting a working money to add up to obligation proportion of 28.91%, flagging that SEEK’s obligation is fittingly secured by working money. This proportion can likewise be an indication of operational proficiency as a contrasting option to return on resources. For SEEK’s situation, it can produce 0.29x money from its obligation capital (Boyd, 2018).

Conclusion:

Based on the ratios above it is not recommended to invest in the stock as the company’s position is not strong with respect to fundamentals over the past few years.

References

Boyd, J. (2018, May 31). What You Must Know About SEEK Limited’s (ASX:SEK) Financial Strength. Retrieved from Simpy Wall Street News: https://simplywall.st

Heikal, M., Khaddafi, M. and Ummah, A., 2014. Influence analysis of return on assets (ROA), return on equity (ROE), net profit margin (NPM), debt to equity ratio (DER), and current ratio (CR), against corporate profit growth in automotive in Indonesia Stock Exchange. International Journal of Academic Research in Business and Social Sciences, 4(12), p.101.

Delen, D., Kuzey, C. and Uyar, A., 2013. Measuring firm performance using financial ratios: A decision tree approach. Expert Systems with Applications, 40(10), pp.3970-3983.