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Instructions

Step 1: Your assigned companies are: International Business Machines Corp. (NYSE: IBM) and Bed Bath
& Beyond Inc. (NASDAQ: BBBY)

Step 2: I got all the data "Data Input" worksheet of the O-S Checklist Template. i fill for each company one
file

Step 3: Use these worksheets to analyze your pair of companies in not more than TWO single A4 page.
Your analysis should include an
#overview of the companies,
# ratio analysis,
# valuation and susceptibility to bankruptcy measures
# and final decision.
Remember the key here are: durable competitive advantage and margin of safety.

Step 4: Finally, you need to pass a judgment whether to buy the company or put it on a watch list.

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Name
Tutor
Course
Date
Company Comparison
The International Business Machines Corporation (IBM) is an American multinational
consulting and technology company. The company manufactures and sells hardware, software,
and middleware. In 2012, the Fortune magazine ranked the company as the second largest in the
United States with 435 000 employees in their global locations. Additionally, it is the fourth
largest in terms of market share and the 19th largest firm when considering the revenues.
However, the companys historical data shows declining growth rates in the sales and equity.
While the company may have an unfavorable debt to equity and debt to assets ratios, the
predictions on how long the company will take to pay its long-term debts expect loan completion
in about 1.3 years. Since 2010, the company has experienced a growth in the retained earnings
though the increases from year to year are minute. The operating cash flow ratio hihglights a
companys ability to meet its short term obligations and IBMs is less than one which may be an
indicator of problems in the company.
The Piotroski screening formula tests a companys susceptibility to bankruptcy. With a
score of 5, IBM is in the middle of the scale which shows a 50% probability for bankruptcy for
the company. Additionally, the intrinsic value of the shares, $74.73 is less than the market price
for the company stock thus signifying a weak stock. A companys margin of safety should be

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above or equal to 50% to ensure smooth business operations. However, IBMs margin of safety
is -7.86. These factors coupled with the decreased net incomes as reported in the income
statements lead to the decision to put the stock on a watch list.

Bed Bath & Beyond Inc, is a chain of retail stores franchise with stores in the United
States, Canada, Mexico, and Puerto Rico. The stores deal with domestic items including linens
and home furnishings, bath towels, cookware, Cutlery, and window treatments. Additionally, the
company has subsidiaries such as Cost Plus World Market, Christmas Tree Shops, and that,
Harmon face values, and Buy Buy Baby. The company also has an e-commerce store to increase
consumer-shopping convenience. The online store is unique in that it provides limited edition
items from emerging home and fashion designers. The company is also counted among the top
Fortune 500 companies.
While the company is currently ranked among the highest earning retails stores, its
growth rate for the next five years is predicted as 0.06%. the companys ratio analysis also yields
valuable data on the companys health. The current ratio is 2.10, which is higher than the
minimum of 2 required as a measure of the companys ability to repay short term obligations.
The companys margin of safety is pegged at 34% thus qualifying the company for either
purchase or putting on the watch list.
The Piotroski rating for the company is five hence, there is a moderately low probability
of the company going insolvent. The companys long-term asset to long term debts ratio is zero
hence improving the companys outlook for future earnings. The Altman-Z score also yields
similar results regarding the company health as Bed Bath & Beyond Inc has a rating of 5.427

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thus making unlikely that the company can become bankrupt which makes it a sound investment.
From these factors, and the relatively stable growth and income rates, it is safe to purchase
BBBY stock.

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Works Cited