TP2 - Analysis and Comparison Based on Investing Activities

The horizontal and vertical analysis of all three companies’ long term assets identified the fact that all three companies are currently engaged in a tremendous period of physical growth. The greatest growth rate of long term assets was experienced by Cabela’s with a 30.6% increase from the previous year. Dick’s Sporting Goods increased its long term assets by 16.96% and Costco achieved a more sustainable rate of 10.3%. We feel that even though all three companies were growing in size the rate of increase experienced by Cabela’s could be unsustainable and cause degradation in operating efficiency.

The investing cash flows and accounting policies were consistent from company to company. The investing cash flows did not reveal any information that would cause us to feel more negative or positive about any of the companies. Additionally, the accounting policies implemented by each company were very consistent. Each company records property and equipment at cost and uses the straight line depreciation method.

The examination of property and equipment confirmed our conclusion from our analysis of long term assets that each company is continuing to grow. The most mature of the three companies is Dick’s Sporting Goods with the depreciation of 41.3% of its property and equipment. Costco and Cabela’s are currently at rates of 26% and 21% respectively. This information once again indicates that Cabela’s is expanding its operations the fastest and this may increase the risk associated with this company.

We examined return on assets and return on fixed assets in order to determine the level of efficiency for each company. Dick’s Sporting Goods was the top performer in both categories. Additionally, Dick’s has been able to achieve a relatively high net profit margin of 3.62% while increasing its margin year over year. Conversely, Cabela’s has also increased its net profit margin year over year and achieved a rate of 4.16% but it has become a more inefficient operation over the same period. We also examined asset turnover in order to analyze the investment policies of each company. The top performing company in this category was Costco but Dick’s once again performed very well in this category. The analysis of the investing ratios further strengthens our conclusion that Dick’s Sporting Goods is a very stable and efficient company that employs sound investment strategy.

Review Company Specific Analysis:
Analysis of Investing Activities: Dick's Sporting Goods Inc.
Analysis of Investing Activities: Costco
Analysis of Investing Activities: Cabela's Inc. and Subsidiaries