Security Analysis Report of Kellogg (stock ticker K) Research Paper - 1

Security Analysis Report of Kellogg (stock ticker K) - Research Paper Example â€Å"The most common deciding factors used in the market to attempt to anticipate future stock pricing are recent price history and patterns, current price relative to past price levels or other stocks, beliefs about future price movement, and a fourth area that can be described generally as ‘reckless optimism† (Thomsett 1). 2. Discussion of background of the company. Kellogg is a leading producer and distributor of cereals, which was founded in the year 1906. From the year 1906 Kellogg had been expanding mainly by creating its own new brands of cereals, cornflakes, and other cereal related food products. The financial statement from 2006 to 2010 contains 5 years, which require to be inspected to recognize the stock activities in Kellogg. It is listed on the Dow Jones Stock Exchange and New York Stock Exchange. Kellogg’s had expanded over the years and has a good market share. Its stocks and share prices showed a very positive trend and investors were on a rush t o invest in Kellogg stocks. Due to economic recession of 2007 like other companies kellogs socks also took a stagnat approach. So this paper investigates whether an investigator should invest in Kellogg’s shares by buying, or he should be holding his decision or in fact the investor should be selling Kellogg’s shares in the stock market. ... A stock is considered as best or perfect only when all the dimensions are perfect and project a future growth for its investors. An expanding business has growing and healthy revenue. The stock movements are a projection of a business and past results are no guarantee yet the past stock records of a firm influence its present and future movements to a certain extent. A firm which has high sales does not mean it is earning high profits. High sales do not measure a stock’s performance, whereas the profits of a firm directly affect the stock movements. From the income statement of Kellogg, it is understood that the net sales from the year 2006 to 2008 show an increasing trend while the year 2009 and 2010 point out to a decreasing movement in net sales as compared to the previous year. From 2006 to 2008 there was an increase in net sales by around 18%. While in the year 2009 there was a drastic downfall by around 2%, similarly, the year 2010’s net sales also showed a decrea se by 1.41% A consolidated average from the year 2006 to the year 2010 with respect to the net sales of the firm shows that Kellogg has experienced a growth of 13.66%. Comparing the net earnings of Kellogg there is an increase of 24%. In such a case, Kellogg stocks have to be brought. Comparing the net earnings of the years 2009 and 2010, there is a decrease of 2.9%. The profits of a firm are understood from its payment of dividends. A firm with a strong balance sheet does not have to worry about its debt. The return on equity helps to measure how well a firm is converting its resources into profitable business endeavors for expansion purpose. If the five-year annual revenue growth is more