This seems to have been in response to the perception of an upcoming slowdown and indicates that the firm is both cognoscent of its liquidity position and is taking steps to ensure the robustness of that liquidity position.
Moreover, in terms of cash flow coverage, State Street is in a solid position. Cash flow coverage measure the ability of the firm to pay its interest expense. In each of the past three years, State Street has generated more interest revenue than they have incurred interest expense.
Because it is difficult to separate operations and investments in a financial services firm, such as State Street, measuring the firm's operating efficiency is valuable. State Street's asset turnover is 6.7%. The gross margin was 15.1% in the past year, slightly down from the previous year. Overall, the gross margin has been steady and healthy over the past few years. If one were to separate out the interest-related activities, State Street's operating margin reveals a strong decline in the past year. Operating margin in the past fiscal year was just 2%, compared with 10.2% and 9.3% in the two years previous. State Street's cost structure has worsened in the past year. Their salary expense increased nearly 23%. A provision for legal exposure was added and the company incurred merger and integration costs. The latter pertains to a pair of small acquisitions the firm made in the past year. The acquisitions were made to access certain intellectual properties, the benefit of which have not yet been realized. Inclusive of investment activities, the operating margin is much stronger, but has remained consistently below the industry average over the past five years.
State Street has consistently carried a P/E ratio akin to a growth company within the financial services sector. Yet, dividend yield and dividend growth are significantly lower than the industry and sector averages. It is also worth noting that State Street's equity is owned by institutions at a much higher rate than comparable firms in either the sector or the industry. Moreover, State's beta indicates a greater degree of risk than in the industry as a whole. This indicates that the growth component of State is the more...
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In fact, as recently as October 11, 2005, Tim Beyers of the Motley Fool pointed to the 38% increase in the closing price of ITT's stock from a year ago at the same time, and suggested that the company is "worthy of further investigation" (Beyers, 2005, p. 4). 2.4.2 Weaknesses. Although Apollo has not fared well in recent months, ITT's competitors continue to represent a major threat to the company's efforts
Not only do situations like this hurt a company's reputation, but increased and extensive legal costs place consistent financial burdens on the company and its international branches, which cannot afford to find themselves in any more scandal. State Street has long made it a company mission to not only serve the needs of its institutional investors, but to continue providing that service in a way that is both effective and
A high rate of turnover may indicate too strict credit policies or an inability to extend credit. It is the tradeoff between sales and tying up funds in receivables. Sales to Working Capital - measures the relationship between sales and the working capital of a business. Too high a ratio may indicate an insufficient amount of working capital. Too low a ratio may indicate unproductive assets. Sales to Total Assets -
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