# Compare stocks and make good investment decisions

The next step for Dr. Bueller is to help him compare stocks and make good investment decisions. With that in mind, you want to compare Industrial Company #1 with its top rival Industrial Company #2 and explain to Dr. Bueller which one would make a better investment.

In preparation for sharing your thoughts with Dr. Bueller, go to the Small Group Discussion Board and divide the following calculations evenly among group members. Each group member will be responsible for submitting his or her assigned calculations.

• Operating income margin
• Net income margin
• Current ratio
• Earnings per share
• Price-to-earnings (P/E) ratio.
 Industrial Company #1 (in millions) 2008 2009 2010 Sales \$4,250 \$4,500 \$4,750 Operating Income \$400 \$445 \$480 Net Income \$200 \$225 \$250 Current Assets \$2,500 \$2,750 \$2,850 Current Liabilities \$2,300 \$2,450 \$2,500 Shares Outstanding 100 100 100 Average Stock Price \$32 \$39 \$50
 Industrial Company #2 (in millions) 2008 2009 2010 Sales \$3,350 \$3,750 \$4,250 Operating Income \$335 \$395 \$470 Net Income \$168 \$198 \$240 Current Assets \$1,750 \$1,900 \$2,100 Current Liabilities \$1,350 \$1,400 \$1,500 Shares Outstanding 80 80 80 Av Stock Price \$38 \$46 \$62
 2010 Industry Avg. Operating Margin 10.50% Net Margin 5.50% Current Ratio 1.25 Earnings/Share \$2.75 PE Ratio 20.0

Group Project Guidelines

• perform the calculations of the following values for both Industrial Company #1 and Industrial Company #2 using the information from the data tables located in the Assignment Description:
• Operating income margin
• Net income margin
• Current ratio
• Earnings per share
• Price-to-earnings (P/E) ratios
• organize calculations in an Excel spreadsheet
• Compare his or her calculations for both Industrial Company #1 and Industrial Company #2.
• Compare the company calculation values to the industry averages.
• In your own words, explain the significance of each calculation.
• write 3 pages (body of paper), in a Word document, about which company is a better investment