Ryanair and easyJet Case Study

The graph shows that asset’s operating profit margins declined sharply, reaching only 3. 85% from 10.

16% and this is moderately low, compared to the three-year average of 7. 09%. Unlike asset, Urinary has more stable profit margins, 21. 01 % on average. According to the figures, Urinary seems more vigorous in generating higher profit from its sales, which was partially due to hotels, car rentals and other non-flight products selling.

On the other hand, asset seems had been negatively affected by Intense intention among its rivals as well as the price pressures. Return on Capital Emulsifiers 2. Return on Capital Employed (%)The ROCK shows the performance of business in generating profit to its long-term capital suppliers. (Thrall & McAllen, 2008) The highest ROCK ratio, 10. 41 % in 2007 specifies that asset had a better performance by fully using Its assets In generating revenues. However, the ROCK slid dramatically to only 4.

46%, which Indicates a weak performance because its return on assets was probably below its cost of capital.

In terms of overall ROCK, Urinary had a higher margin, 1 1 . 9%, than asset, 7. 73%. From this figure, it is suggested that asset should operate at Ryan’s significant discount. Return on Shareholders’ Fenugreek 3.

Return on Shareholders’ Fund terms of the overall ROSS, the shareholders’ In Urinary were more beneficial than those In asset as they gained higher return. This is showed by the average ROSS of 17. 06% compared to only 10. 43% from asset, meaning the investment made by shareholders in Urinary was more profitable than in asset. Gross Profit Marguerite 4.

Gross Profit Margin (%)There was an insignificant decline in GUM for both companies.

It Is presumably owing to the Increased operating expenses as a result of the rise In fuel costs and extensive price competition. Efficiency Ratios highlight how the business resources have been utilized efficiently. (Trill & McAllen, 2008)Assets Transfigure 5. Asset Turnover (point)The rate of asset turnover for asset and Urinary increased gradually for the last three years. This, In essence, means that they had a better return corresponding to their net recovered to 1.

16 point in 2008.

On the other hand, Urinary showed a consistent asset turnover even though its points were lower than asset’s. It is clearly seen that Urinary was capable of translating its assets into constant increased sales revenue over the last three years. Creditor Disfigure 6. Creditor Days comparison to the average creditor days for both companies, it is thought that the trade payable account had a minor impact on Urinary.

Unlike Urinary, asset seems had been more beneficial because it used the free finance from its suppliers to buy its inventories and then repay them back within quite a long time.

Debtor Disfigure 7. Debtor Disaccording to the figures, Ryan’s customers needed less than 6 days to fulfill their payment. Indeed, asset’s customers needed ore than 40 days on average to pay the company. It could be assumed that asset tried to attract more travelers by providing a better payment facility.

Liquidity Ratios measure how companies could pay the debt. (Trill & McAllen, 2008)Urinary aesthete liquidity ratios for Urinary and asset were relatively the same as their stocks play an insignificant role.

Current and quick ratios tended to stay at the same level as both companies do not hold any psychical production stocks. An average current and quick ratio of 2. 02 for the last three years indicates that Urinary appeared to be more capable of covering and repaying its short-term bets and obligations.

Overall, both companies did not experience any problems in terms of liquidity because their current assets were able to cover the current liabilities. Financing Ratios show how companies finance their business whether from shareholders’ funds or debts. (Trill & McAllen, 2008)Gearing Reconfigure 8.

Gearing Rationality showed a higher leveraging on its balance sheet, 46. 48% on average, than asset, 39. 95%.

It is partly because the borrowed money was mainly used in investing new aircrafts or launch new range of routes. This led to higher returns to shareholders’ equity in Urinary rather than in asset. Interest Cover Reconfigure 9. Interest Cover Respirators the figures above, Urinary was able to generate high operating profits to cover its interest expenses as can be seen by the high interest coverage ratio on average of 5. 43. However, the interest cover ratio of asset slid to only 2.

8, which was particularly caused by a dramatic fall in the profit for the year from E 152. 3 million to E 83. 2 million. Investment Ratios assist investors in assessing their return on the made investment. (Trill & McAllen, 2008)asset relies on a free cash flow financing to further its growth.

As a result, asset pays no dividends. The same dividend policy is also followed by Urinary. Growth prospect, was traded at a lower price, 20. 16, in comparison to asset at 24. 33. This shows that asset was traded more expensive relative to Urinary.

Non-financial terms such as the traffic growth, the number of employees, load factor, number of routes and aircrafts could also affect the business greatly apart from financial ratios. They help companies identify trends for future performance. For instance, the load factors for both companies remained stable over the last three years. However, Urinary achieved 82% in load factors while asset stood at 84. 1%. This figure illustrates that asset was able to fill its planes slightly better than Urinary.

III. THREATS AND OPPORTUNITIES Malaysian price fluctuations a significant cost to asset and Urinary.

In 2007, the average fuel price was $65/barrel, but today, it is $130/barrel. In this case, asset could be more vulnerable in facing the rise of fuel price. However, Urinary offers no fuel surcharges to its customers. (Urinary Annual Report, 2008)Therefore, Urinary stimulates that many passengers will switch to travel by their flights to avoid higher prices as a consequence of additional fuel surcharges from other low-cost airlines.

Terrorism or security threat on the aviation industry may cause a loss of key national infrastructure and a rise in safety and security cost measures. Urinary Annual Report, 2006)Market competitions rise in competition could lead to a saturated market as many low-fare new entrants are entering the market such as ‘bambina’. This will also result in a complexity in getting low fees support in some airports. Main opportunities:customers are price sensitive. (asset and Urinary Annual Reports, 2008)The slowdown in the economy will definitely lead the customers to seek lower fares airlines.

This means that there will be a rise in passenger volumes. Market superannuation Union enlargements could let both companies to have opportunities to expand and open up new destinations. Asset and Urinary Annual Reports, 2008)Len addition, potential market such as Asia contains many potential opportunities because it has a very huge population and immigrant inflows are on the rise. Business-to-business characterization’s could have additional source of income generated from its asset Academy. In addition, it could corporate with other easy businesses such as assayer as well as sufferance. Asset Annual Report and Accounts, 2008) .

This could also increase the trades in ‘easy’ businesses. However, Urinary could corporate with travel agencies, as this would bring another business opportunity.

Many travel agencies nowadays have Europe trips that could increase the flying demands. Financial ratios, I could offer recommendation to invest in Urinary. There are two methods used in analyzing the shares:Len terms of fundamental metrics such as the ROCK and operating margin, Urinary shows better performance than asset.

Urinary has a gradual increase in its return on capital. Similar conclusion could be drawn from its Price-to-Book and PEE ratios. A 2. 13 PET illustrates that investors are more willing to pay higher price for Urinary than for asset with only 1. 03 .

In addition, a PER of 24.

33 showed that the price paid for asset is more expensive. Therefore, I remain cautious about asset’s share price perspective and would recommend Urinary indeed. Technically, Ryan’s trading prices are principally more stable rather than asset. This shows that shares in Urinary are actively traded as many investors see the future prospect of Urinary could be better than asset. However, if I personally had EYE,OHO, I would not have them invested on shares considering the unstable and unpredictable market. We know that all businesses create risks.

The more the risk, the higher return we will get. Investing on shares is a ‘high risk, high gain’ and a long-term portfolio. Therefore, I would prefer to invest on properties or becoming sole trader instead of investing on shares because shares will not give returns in short-term period, moreover they are risky.