Students working on business degrees will have many opportunities to evaluate the organizations they work for, work with, or any organization that appeals to them, during their studies. Applying the information from their school to these environments promotes stronger retention of essential information, and allows the student to make informed decisions based on information available or to assist the student in recognizing what essential information is not available. In some situations, colleges allow the students to build information based on the information found, in order to have figures to work with for developing assignments.
This report is specifically on West Corporation, much has changed with this organization in the four years after this report was written, but the analysis can be a good starting point for students learning to address their own needs for courses teaching about portfolios.
West Corporation, founded in 1986, has seen progressive growth and development that has made them a leader in the industry (West History, 2006). With growths in technology – IVRs- and increase in available services, West Corp. shows the world that the hardest industry to maintain is not beyond their reach. In recent years, West has undergone changes in management, name, stocks, and currently private investors have taken on the responsibility to continue West Corp’s success (Schelmetic, T. 2006, para. 1).
West Corp’s stock has grown steadily since 2003. This growth came after a very small decline in value during 2002 (down by $8.34) (http://investor.shareholder.com/west). The steady growth is important to us because it means that our stock will increase in value, and that there is a lot of faith in this company. At West, profitability ratios show us that they are doing better than AT&T in all ratios except Return on Equity (Freeman, D., 2006). Operating Margin is better than Kraft, as well as Net Profit Margin, and Return on Assets (Shaffer, L. 2006). This figures are projected to improve even more under the supervision of Thomas H. Lee Partners and Quadrangle Group (West Corp, 2006).
Often we have to decide on portfolio items that require information we cannot decide on; however, when we invest our decisions should be solidly based on both past performance, market values, and future goals of a company. West has shown in the past that they will make the changes needed to stay competitive in today’s ever changing environments. West has not shied away from change. West has grown progressively over the years and continues to make sound financial decisions that decrease their debt and increase their profit margins.
As we consider our options for our portfolio, we must seriously consider what we see in both history for a company, and what we see happening in their future. While diversity is a key to success, we must decide on our first company. West Corp has continued to grow, and even with the current private investors acquiring West, West has continued on the same paths to achieving greatness in their commitments to their stakeholders and their stockholders. I am completely for dedicating ourselves for this company.
West Corp is striving to be the best communication option for all businesses. Whether you are looking for customer service solutions, sales solutions, accounts receivable solutions, or conferencing solutions – West is striving to bring it all with the flair you would hope to present to your consumers on every occasion. West Corp. has shown success in the stock market – August 2000 = $22.94 and August 2006 = $47.72 – with substantial growth that makes the stock incredibly desirable, including how seldom it actually devalues. However, will this make it our portfolio pick of the day?
When we consider our portfolio we start with financial information and seldom delve into the actual process that run a business; however, as I get further into this discussion I will point out ways that the “other” stuff is going to impact the productivity of a company. For now, a quick review of what my Excel sheet shows in ratios: Gross Profit is unclear because West Corp is a services industry that did not report sales as “sales” therefore, I took the 2006 Revenue = $461,678, and then adding both cost of services and administrative costs (the following number shown in orange). This showed a Gross profit margin of 1.2. Next I determined the Operating Profit Margin of 45%. Net Profit Margin is 22%. Return on Assets is 26%. Return on Equity is 1.41%. Liquidity ratio, current ratio is 1.4. Debt ratio is 1% and Times Interest Earned is 8.98. Market Value Ratios are Price to earnings = 88.37, and Market to Book Value is 8.1. Some things to worry about include the profitability of the different locations, the 690 million revolving credit line, and the Long Term Obligations.
The communications business can be a very difficult business. Currently, there is a lot of faith in the West Corp. success, as we can see from the huge difference in book value to actual price of the stock. In the long run, if West closed their doors tomorrow, everyone with stock in this company would have basically lost their investment. Why is West Corp.’s stock worth so much? It’s actually something a little different than just market value. In July, Technology Marketing Corporation announced that West Corp “entered a definitive agreement to be acquired by a group of private investors led by Thomas H. Lee Partners and Quadrangle Group.” (Schelmetic, T. 2006, para. 1). This agreement included buying out the shares at a higher rate. With the approval of West upper management, this agreement was passed on to stockholders.
West Corp is a very busy company, they have acquired many other companies, and have attempted to grow their services for their customers – other businesses (http://www.west.com/). The stock is worth quite a bit of money, most of the figures show that this company is in fairly good shape. As an investment for a solid portfolio, this investment is financially sound, because West appears to be willing to do whatever is needed to be successful. There is a downside, productivity can make or break a company, and West is no different. Communications and services companies rely heavily on the quality of their employees. Unlike machines, people can be difficult to maintain high standards with. West works hard to develop their technology; however, their people resource is not always utmost on their list – while it is utmost on their ability to succeed.
Freeman, D. (2006). Phase 3 Task 4… FIN310 Discussion Board. Retrieved on August 9, 2006, from CTU Classroom.
Gallagher, T., & Andrew, J. (2003). Financial Management, Principles & Practice, third
edition. Upper Saddle River, New Jersey: Pearson Education, Inc.
Schelmetic, T. (July 2006). West to be acquired by private investors. Customer Interaction Solutions, copyright, Technology Marketing Corporation. Retrieved on August 3, 2006, from CTU Cybrary ABI Inform.
Shaffer, L. (2006). Phase III DB2…FIN 310 Discussion Board. Retrieved on August 9, 2006, from CTU Classroom.
West Corporation http://www.west.com/