Forum Archive Index - July 2001

[Philip Robinson <robph639@student.otago.ac.nz>]

The tale of two companies

I thought that both Baycorp Holdings  and Waste Management  were both
excellent companies until I had a closer look and I thought I would bounce
the results off you guys.

Market Share
Both have an excellent market position that cannot be faulted.

Long Term Debt
BCH has no long term debt.
WAM's Long term debt is 3.19 times NPAT (2000), $45.7 million

Return on Equity (BCH)
1998    40.1%
1999    46.8%
2000    43.2%

Return on Equity (WAM)
1998    9.5%
1999    10.4%
2000    14.8%

EPS Growth
Both show good eps growth, from 1995 to 2000, increase was
BCH $0.065 to $0.203
WAM $0.088 to $0.147
A noticeable difference.

Revenue Growth
BCH 1994: 24m to 2000: 58m (2.42)
WAM 1994: 51m to 2000: 137m (2.69)

Management Return Ratio (MRR)
This is obtained by taking the retained earnings and using the change in
EPS and plugging it into the formula:
MRR = Change in EPS (y1 to y5)/Retained earning (y1 to y5)
This does have the disadvantage of ignoring capital structure changes, but
is a nice rough guide.
BCH  = 268%
WAM = 13.2%

Margin Control
Both have excellent control over margins.

Return on Invested Capital & Weighted Average Cost of Capital
(ROIC: My calculation
WACC: PriceWaterhouseCoopers: Cost of Capital Report, c/o PWC internet site
EVA: Economic Value Added, c/o  Stewart Stern & Co., & McGill Investment Club)

BCH (2000)
WACC    11.1%
ROIC    19.9%
Spread +8.8%
Ratio 1.79
EVA +$6m

WAM (2000)
WACC    6.5%
ROIC    10.3%
Spread  -3.8%
Ratio 0.63
EVA -$12.8m

Well after looking at the figures I have decided that BCH really does have
superior fundamentals. The WACC/ROIC and EVA figures really helped me
separate out the two companies. All credit to the pdf I posted before and
Stern Stewart & Co.

Note: Do not hold BCH or WAM.

Disclaimer: Except where specificed, all calculations are my own, and no
responsibility will be accepted for the accuracy of any statement in this
document. All are meerly a guide to the real figures, as I am not an
analyst. They could be complete wrong. Essentially don't take any of this
stuff so seriously that you do anything differently, cos I don't want to
get into trouble. 







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