Almarai Company

INVESMENT ANALYSIS

SECOND SEMESTER 2024/2025

INSTRUCTOR: Dr. Abu Al-Hasan
SECTION: H1
GROUP MEMBERS:
Alanoud Alqahtani 222411214
Amjad Alsubaie 222419963
Nouf Alqahtani 222407635
An overview of Saudi Almarai Company shares:

Almarai Saudi Company is one of the leading companies in the food and dairy
products industry in the Kingdom of Saudi Arabia. The company was established
in 1977 and is listed on the Saudi Stock Exchange (Tadawul) under the symbol
2280. Almarai operates in the dairy and food sector, offering a wide range of
innovative and high-quality products.
Almarai Company
is distinguished by several factors that highlight it as an attractive company for investment. Here are some points that highlight the
importance of investing in:

01. Market leadership: 02.Product diversity: 03.Quality and innovation:

Almarai is considered a pioneer in the Almarai offers a wide range of food Almarai relies on quality and innovation in
dairy industry in Saudi Arabia, and products, including dairy products, juices, its products. The company uses modern
occupies a large share of the market. The frozen foods, canned dairy products, technology and strict processes to ensure
company has strong competitive strength yogurt, dates, and baked goods. This the provision of high-quality products that
and a strong presence in the local market. diversity helps the company meet the needs comply with health standards.
of many different markets and age groups.
Almarai Company
04. Global expansion: 05.Sustainability:

Almarai seeks to expand globally by Almarai pays great attention to

investing in other companies and sustainability and social responsibility. The
establishing strategic partnerships. This company works to improve the
helps the company expand its customer environment and support local
base and increase growth opportunities. communities through sustainable initiatives
and awareness programs.
Continue:
Our choice of Almarai Company is due to optimism about the
future of the company and the dairy sector in general. The dairy
industry is an essential sector of the food sector and has a
sustainable demand. Almarai's long history and strong presence
in the market enhance its confidence and stability. Its
commitment to quality and innovation also reflects its ability to
adapt to changes in consumer needs.
Moreover, there are significant growth opportunities in the dairy
market in Saudi Arabia and the Gulf region in general, as interest
in healthy nutrition and organic products is increasing. Demand
for dairy products and healthy foods is expected to continue to
rise, enhancing Almarai's growth opportunities and profitability.
 Financial Ratios

Financial ratios are key tools used to assess a company's financial health and performance. They provide insights
into various aspects of a business, such as liquidity, profitability, and efficiency. These ratios help investors,
analysts, and managers make informed decisions and compare companies within the same industry. Understanding
and interpreting financial ratios is crucial for evaluating a company's financial position and making sound
investment choices.

We have five financial ratios:

Liquidity ratios
Activity ratios
Leverage ratios
Profitability ratios
Common stock ratios
Liquidity Ratios Column1
Liquidity ratios
2021 2022 2023
Current ratio 1.0721825 1.5985806 1.3992312
•Liquidity ratios are financial metrics used to
Quick ratio 0.4149412 0.5683484 0.648233
assess a company's ability to meet short-term
obligations and convert assets into cash quickly. Net working capital 478,140 3,042,856 3,268,382
The main ratios include the current ratio, which
compares current assets to current liabilities, the
quick ratio, which excludes inventory from • As we can see here, the current ratio of Almarai company for the three
current assets, and the net working capital ratio, years is above 1 which indicates that the firm have current asset more
which measures a company's ability to cover than currently liabilities.This suggests that the company has sufficient
current liabilities with cash and cash equivalents. short-term assets to cover its short-term debts and obligations, such as
These ratios help determine a company's short- paying off short-term debts and covering operational expenses.
term financial health and its capacity to handle
unexpected cash flow challenges.
Liquidity Ratios
• The net working capital ratio provides a measure of the net
amount of a company's short-term assets available to cover
Liquidity ratios its short-term liabilities and is expressed as dollar amount.
A positive ratio indicates that a company has more current
Column1 2021 2022 2023 assets than current liabilities, while a negative ratio
Current ratio 1.0721825 1.5985806 1.3992312 indicates the opposite. A higher ratio suggests better short-
term liquidity and financial flexibility, and as we can see
Quick ratio 0.4149412 0.5683484 0.648233 the company improved their financial flexibility in the last
three years.
Net working capital 478,140 3,042,856 3,268,382

• As for the quick ratio for the company for the three years is less than 1 which suggests that the company's liquid assets may
not be sufficient to cover its current liabilities. It indicates that the company relies heavily on inventory or other less liquid
assets to meet its short-term obligations. This could potentially indicate a risk in meeting immediate financial obligations,
such as paying suppliers or servicing short-term debts.But as we can see the ratio increases over the years, which means
that the company is taking measures to improve its financial position.
 Activity Ratios
•Activity ratio is a financial metric that measures a company's efficiency in managing its assets by
evaluating how quickly it converts them into sales or cash. It helps assess the effectiveness of
operations and inventory management.

• As we can see here, the accounts receivable turnover for the

first year was 7.95, and then in 2022 It gets higher reaching
Activity Ratios 8.68 but then in 2023, it goes down to 7.63. A higher
Column1 2021 2022 2023 accounts receivable turnover ratio indicates that a company
is collecting its accounts receivable more quickly, which is
Accounts receivable turnover 7.9598635 8.6840429 7.6328604 generally viewed as positive. It suggests that the company
has effective credit policies, timely collection efforts, and a
Inventory turnover 3.6406042 3.5749039 3.1839595 low level of overdue receivables. A higher ratio also implies
that the company has a shorter cash conversion cycle,
Total assets turnover 0.4991361 0.5837213 0.5408514 allowing it to reinvest the cash received from customers
more rapidly.
Activity Ratios

Activity Ratios
Column1 2021 2022 2023
Accounts receivable turnover 7.9598635 8.6840429 7.6328604
Inventory turnover 3.6406042 3.5749039 3.1839595
Total assets turnover 0.4991361 0.5837213 0.5408514

• As for the inventory turnover ratio, as we can see for the past • finally, the total assets turnover for the company
three years, it’s never gotten higher than 3 which indicates that for the past three years was lower than 1 which
the company is facing challenges in selling its inventory or is indicates that the company is generating less
holding excessive amounts of stock. This can be a concern, as it revenue relative to its total assets. The total asset
suggests that the company's capital may be tied up in inventory turnover ratio measures a company's ability to
that is not selling quickly enough. It could lead to increased generate sales or revenue using its total assets.
holding costs, obsolescence, and potential cash flow problems.
 Leverage Ratios

Leverage Ratios • The equity multiplier ratio for the company has increased for
Column1 2021 2022 2023 the past three years indicating that the company relies more on
debt (liabilities) than on shareholders' equity to finance its
Debt-Equity ratio 0.5121936 0.5892794 0.5726656 assets. This means that the company has taken for the past three
years a significant amount of debt to fund its operations and
Equity multiplier 1.9107903 1.8886077 2.032364 growth. While this strategy can amplify returns during
favorable conditions, it also increases the company's risk and

Times interest earned 5.8222173 5.3170544 5.1115576 potential financial volatility.

• The debt-equity ratio for the company for the past three years, was • The times interest earned ratio for the company for the last
below 1, which indicates that the company has a conservative capital three years was above five which means that the company's
structure and lower risk of financial distress. It means that a larger earnings before interest and taxes are five times greater than
portion of the company's assets is financed through equity, which is its interest expense. This suggests that the company has a
viewed positively by investors and lenders. A lower debt-equity ratio relatively comfortable margin of safety and is generating
also suggests greater financial stability, as the company has a better sufficient income to cover its interest payments.
ability to fulfill its debt obligations. This ratio implies a lower interest • A TIE ratio of 5 is generally considered healthy and
expense burden and increased flexibility in financial management. indicates that the company has a strong ability to meet its
interest obligations.
 Profitability Ratios
Profitability Ratios
Column1 2021 2022 2023
Net profit margin 10% 9% 10%
Return on assets (ROA) 5% 6% 6%
Return on equity (ROE) 10% 10% 12%

• The net profit margin ratio of 9% or • In 2021 the company had a return on • In 2021, and 2022 the ROE ratio was 10%
10% suggests that for every dollar of assets ratio of 5%, it means that for which suggests that the company generates 10
revenue generated, the company is every dollar of assets it has, it cents of net income for every dollar of
able to retain 9 cents or 10 cents as generates 5 cents of net income. This shareholders' equity. This indicates a moderate
net profit, respectively. A higher net suggests that the company's level of profitability relative to its equity base.
profit margin ratio generally profitability in relation to its assets is While the company is providing a reasonable
indicates that a company is more relatively low. In 2022, and 2023 the return for its shareholders, it may not be as
efficient at controlling its costs and company had an ROA ratio of 6%, efficient as some other companies in generating
generating profit from its operations. which indicates that for every dollar of profits.On the other hand, in 2023 the ROE
It suggests that the company has a assets, it generates 6 cents of net ratio increased reaching 12% which means that
higher level of profitability relative income. This suggests a slightly the company is more efficient in utilizing its
to its revenue. higher level of profitability compared equity to generate profits and is providing a
to the 5% ROA. better return for its shareholders.
 Common-Stock Ratios
Common-Stock Ratios • The PEG ratio of 2.18 or 2.13 indicates that the stock
Column1 2021 2022 2023 may be overvalued relative to its earnings growth
potential. Investors are willing to pay a higher multiple of
Price-to-Earnings(P/E) 30.55 29.89 26.83
the company's earnings for the expected future growth.
Price/Earnings Growth (PEG) 2.18 2.13 1.91 • On the other hand, a PEG ratio of 1.91 suggests that the
Dividends per share 0.0000001 0.0000001 0.0000001 stock is fairly valued. The P/E ratio is roughly in line
Payout ratio 6.289E-08 5.587E-08 4.808E-08 with the expected earnings growth rate, indicating that
Book value per share 1.6618413 1.6982865 1.7808825 investors are paying a fair price for the company's growth
prospects.
Price-to-book-value 29.226617 31.502341 31.33278

• The P/E ratio of 2021 indicates that investors are willing to pay 30.5 times the
earnings per share for the stock. Similarly, a P/E ratio of 2022 indicates a
valuation of 29.88 times the earnings per share, and a P/E ratio of 2023 • The dividend per share ratio of the company for the
indicates a valuation of 26.82 times the earnings per share. past three years indicates a very low dividend
• In general, a higher P/E ratio suggests that investors have higher expectations payout per share of the company's stock. It means
for the company's future earnings growth, and they are willing to pay a that for each share of the company's stock, the
premium for the stock. It could indicate that the company is expected to dividend payout is 0.000001 of the company's
experience significant growth or that it is in a high-growth industry. However, a currency.
high P/E ratio could also suggest that the stock is overvalued and the market has
overly optimistic expectations.
 Common-Stock Ratios
Common-Stock Ratios
Column1 2021 2022 2023
Price-to-Earnings(P/E) 30.55 29.89 26.83
Price/Earnings Growth (PEG) 2.18 2.13 1.91
Dividends per share 0.0000001 0.0000001 0.0000001
Payout ratio 6.289E-08 5.587E-08 4.808E-08
Book value per share 1.6618413 1.6982865 1.7808825
Price-to-book-value 29.226617 31.502341 31.33278

• A payout ratio of 6.28, 5.58, and 4.80 would • The book value per share of the • The P/B ratio of the company for the last
mean that, respectively, 6.28%, 5.58%, and company for the past three years is three years indicates that the market price of
4.80% of the company's earnings are being greater than 1 , which suggests that the stock is significantly higher than its
paid out as dividends. the market price of the company's book value. A high P/B ratio generally
• A higher payout ratio generally suggests that a shares is lower than the net asset indicates that investors have high
larger portion of the company's profits is value per share. This could imply expectations for the company's future
being distributed to shareholders, indicating a that the stock is undervalued in the growth and profitability. It could also imply
more generous dividend policy. However, the market, as investors are paying less that the stock is overvalued or that investors
company payout ratio has decreased in the for each share than the company's have a positive perception of the company,
past three years, which indicates the opposite. net worth suggests. leading to a premium being placed on its
shares.
Beta:
1- Closing price:
First, open the Saudi trading website and then choose the company
you want.
Enter our markets - the main market. And then we go into the
historical presentation , then choose the period that for us is from
1/1/2019 to 12/31/2023, and take
Closing price for the last day of the year. This is how you can find
the closing price you need.
 Beta:
2-Return:
First, click on the cell, then type =. After that, we determine the closing
price at the end of the new year divided by the end of the old year minus
one, and we continue this method for return Almarai and return index for the
five years.
Beta:
3-The final result of Beta:
First, click on the cell, then type =. Next, type the formula (SLOPE) and the
slope formula will appear. Then you have to select all Almarai returns. After
that, I put a comma. After that, you have to select all the index returns. After
that, close the parentheses and then press the Enter button, after which the
result will appear.
 The most suitable investor
Almarai is the best decision you can invest in, investing in Almarai can offer several potential benefits.
Based on the information provided, an investor with a moderate risk appetite, such as a risk-averse or
balanced investor, may find Almarai to be a suitable investment. The company displays stable
profitability, moderate leverage, and a positive growth rate, which can be attractive to investors looking
for a balance between risk and return.

Why Almarai is a Wise Decision ?

Investing in Almarai Company can be considered a wise decision for an investor with a moderate risk
appetite for several reasons. Here's a breakdown of the factors that support this claim:

1. Stable and Established Company: Almarai is a well-established company with a long-standing

history of success in the food and beverage industry. Its strong reputation and track record indicate
that the company has a solid business foundation and management expertise.

2. Consistent Financial Performance: The financial data provided in the document demonstrates
consistent revenue growth and profitability over the three-year period. Almarai has maintained stable
net profit margins of around 10% and has shown a positive three-year growth rate in earnings of 14%.
This indicates the company's ability to generate sustainable returns for its investor
Why Almarai is a Wise Decision ?
3. Moderate Risk Profile: Almarai exhibits a moderate risk profile based on the financial ratios
provided. The company has a relatively low debt-to-equity ratio, indicating a moderate level of
leverage and lower financial risk compared to companies with higher debt levels. Additionally,
the liquidity ratios, such as the current ratio and quick ratio, suggest that the company has
sufficient short-term assets to cover its current liabilities, ensuring financial stability.

4. Dividend Distribution: Almarai has a history of distributing dividends to its shareholders. The
document mentions annual dividends per share, although the specific values are not provided. Dividends
can be an attractive feature for investors seeking regular income from their investments.

5. Positive Market Outlook: The food and beverage industry, especially in the Middle East, is
experiencing steady growth. Almarai is well-positioned to benefit from this growth due to its diversified
product portfolio and strong market presence. The increasing population and disposable incomes in the
region are expected to drive demand for high-quality food products, providing opportunities for revenue
expansion.
Thank you for listening