Subject: Comparative Financial Statement Analysis of DMCI Holdings Inc. and SM Development Corporation
1. This refers to your instruction to submit a study on what would be a better investment between DMCI Holdings, Inc. and SM Development Corporation. To comply with it, I made a comparative analysis on both companies’ financial statements.
2. I made use of their profitability, revenue-generation, returns on asset and equity based on their audited financial statements (attached) for the years 2006, 2007, 2008 and 2009 retrieved from BusinessWeek – comparing the year-to-year fluctuations within the firms, and comparing the ratios between the companies.
3. Year over year, DMCI Holdings, Inc. has been able to grow revenues from Php 21.2 B to Php 29.7 B and had a revenue growth as high as 98.64%. On the other hand, SM Development Corporation has been able to grow revenues from Php 3.4 B to Php 5.6 B, year over year, and had a revenue growth high of 64.05%.
4. Based on the Return on Assets ratios, DMCI Holdings, Inc. had as much as 8.12% (2009) ROA, while SM Development Corporation made as much as 11.25% (2006) ROA.
5. Based on the Return on Equity ratios, DMCI Holdings, Inc. made as high as 22.88% (2009) ROE, while SM Development Corporation had an ROE as high as 17.01%.
6. The mean ROAs of DMCI Holdings, Inc. and SM Development Corporation are almost similar (6.6% and 7.6%, respectively) and show little significance in terms of their difference. On the other hand, the mean ROEs of the companies show a more significant difference (15.09% and 10.78%, respectively).
7. Also, because of the industry they are in, both companies have had their shares of erratic fluctuations in terms of ROA and ROE. However, it is very evident that DMCI Holdings, Inc. has more stability in terms of performance, for there are less deviations from the mean ROA and ROE.
8. Hence, it is