Reflection for Electrocomponents Plc

Question: Discuss about the Reflection for Electrocomponents Plc. Answer: Introduction Electrocomponents Plc. is a British-based distributor of electronics, automation and control components, engineering tools and consumables. The company is a mid-size company with close to 6000 employees. It was established in the year 1937 as Radio spares selling spare parts for radios. The company has an annual revenue of GBP 1291 Million and its operating income is GBP 40 million. The objective of this paper is to discuss the financial position of the company. The paper would assess the company position as portrayed by journalists and other financial reports in the media. The paper would also evaluate the corporate governance of the company and it would also discuss the investment opportunity in Electrocomponents Plc. There are various factors that could define the stock position and the share price of the company. These factors could be internal and external in nature (Acharya, 2013). The internal factors would include the internal strength of the company, the available cash flow with the company, the employee strength and capabilities of the company, etc. The external factors would be the factors like competitive position of the company, level of competition in the market, the factors like political, legal, economic, social, technological, etc. Generally, the combination of internal and external factors would determine the stock market presence of any firm. Critical Reflection on Electrocomponents Plc The initial research suggests that Electrocomponents Plc. is a good company to invest. The current trading price of the company is close to 440 GBX. The company has seen a good surge in its share price. In the previous quarter (Sept, 2016), the company was trading at close to 380 GBX. However, the stock price of the company took a dip in the Sept quarter of 2015 (McCahery, 2016). That was the time, when the stock of the company was trading at 180 GBX. It can be said that the company has a good reputation in the market. Different firms, journalists and media has provided a good rating to the company. This is one of the reasons that the investor confidence is maintained in the firm and the company is doing good (Oscroft, 2016). It is expected that Electrocomponents Plc. would continue to be profitable and the investors would continue to get dividends from their shares. The good thing for Electrocomponents Plc is that it has a clean image in the market and this is its biggest advantage. The three-year stock chart of the company can be shown as: I believe that the share price of Electrocomponents Plc can increase further. The market sentiment is good and there are not any serious signs of global recession (Chester, 2016). Therefore, it is expected that the share price of Electrocomponents Plc would strengthen further. I personally believe that the market condition of the company would also depend on the leadership skills exhibit by the top leaders of the company. I believe that a leader should create a mission and vision statement according to their beliefs, moral, values, and standards. I also believe that as a leader you have must lead with compassion and humanity which will help create a vision and mission statement that is centred around how you want others to treat you and how you treat others. Corporate Governance of Electrocomponents Plc Simply defined, Corporate governance is the system of rules, practices and processes by which a company is directed and controlled. Corporate governance essentially involves balancing the interests of a company's many stakeholders, such as shareholders, management, customers, suppliers, financiers, government and the community. The corporate governance framework of Electrocomponents Plc can be shown as: It would be correct to say that corporate governance is an important function for the mid-size and large organizations. In fact, the focus on corporate governance enables the organizations to get closer to customers, end consumers, investors and society at large (Westphal, 2013). Corporate Governance Vision will provide a guide as to what the organization aspires to be and the mission will provide the road map as to why the company actually exists. Another element is to identify the organizations core values. When all these are in place then the next step is to identify the action plan which will help lead into achieving the goals. Then there is evaluation and assessing of the process to ensure to ensure that the plan is being fulfilled. Another key element, which I believe has to be met for any type of organization to be successful, is communication. Communication Strategy is very essential in the sense that there must be a good flow of information on development, on who is being in volved with planning, how are they being involved and how to they communicate with the rest of the stakeholders involved (Erkens Hung, 2012). The key strengths and weaknesses of the corporate governance of Electrocomponents Plc can be discussed as: Strengths: The management of Electrocomponents Plc keeps various internal and external stakeholders involved. For example, customers are invited on the annual day and the feedback from customers is collected. Weaknesses The company has limited focus on sustainable development practices. The company should increase its focus on sustainability and CSR practices. Current Market analysis: Electrocomponents Plc. The company is doing well in the current market environment. The snapshot of the current market analysis of Electrocomponents Plc. can be shown as: Source: https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB0003096442GBGBXSTMM.html The share price of the company is stable. A lot of investors have invested in the company with the expectations that the share price would increase in the future. It is expected that the share price would increase but it cannot be said with complete certainty that the share price would increase (Claessens, 2013). The company is continuously making profits in the last few years and the future of the company looks bright. Therefore, it could be the right time for the investors to invest in the company. The company has a PE ratio of 19.60 and this is a good PE ratio (Denis, 2016). This is another reason for investors to invest in the company. In the tear 2012, the PE ratio of the company was close to 12.5 and therefore it can be said that the company has made huge improvements in its PE ratio. A snapshot of the performance of the company in previous years can be shown as: The above income statement looks attractive and this is the reason that people should continue their investment in the company. Source: https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/GB0003096442GBGBXSTMM.html Conclusion The above paper discusses the financial position of Electrocomponents Plc. With the above discussion it can be said that the company is doing good and it would a good time to buy the stock of Electrocomponents Plc. Usually, there are two types of investors. The first type of investors would invest when the market is down so that they can get good returns on the investment (McConnell, 2016). The second type of investors would have a systematic investment plan who would invest at regular time interval without thinking much about the stock index. The second type of investors is the retail investor who would want to play safe. The stock of Electrocomponents Plc. Is a safe stock and retail investors can easily invest in the companys stock. The underlying assumption is that the stock price would increase in the long term. It is recommended that the investors should invest in the stock price of Electrocomponents Plc. with a long-term time horizon. The short-term investment is generally risk y and the investors may not get good returns in short-term. References Acharya, V.V., Gottschalg, O.F., Hahn, M. and Kehoe, C., 2013. Corporate governance and value creation: Evidence from private equity.Review of Financial Studies,26(2), pp.368-402. Chester, A. G. 2016. Should You Buy Blinkx Plc, Electrocomponents plc And Sareum Holdings Plc On Todays News? Retrieved from: https://www.fool.co.uk/investing/2016/04/05/should-you-buy-blinkx-plc-electrocomponents-plc-and-sareum-holdings-plc-on-todays-news/ Claessens, S. and Yurtoglu, B.B., 2013. Corporate governance in emerging markets: A survey.Emerging markets review,15, pp.1-33. Denis, D., 2016. Corporate Governance and the Goal of the Firm: In Defense of Shareholder Wealth Maximization.Financial Review,51(4), pp.467-480. Erkens, D. H., Hung, M., Matos, P. (2012). Corporate governance in the 20072008 financial crisis: Evidence from financial institutions worldwide.Journal of Corporate Finance,18(2), 389-411. McCahery, J.A., Sautner, Z. and Starks, L.T., 2016. Behind the scenes: The corporate governance preferences of institutional investors.The Journal of Finance. McConnell, J.J. and Qi, Q., 2016. Just Talk? CEO Succession Plan Disclosure, Corporate Governance and Firm Value. Oscroft A. 2016. Should you buy Electrocomponents plc after earnings soar?. Retrieved from: https://www.fool.co.uk/investing/2016/11/18/should-you-buy-electrocomponents-plc-after-earnings-soar/ Westphal, J.D. and Zajac, E.J., 2013. A behavioral theory of corporate governance: Explicating the mechanisms of socially situated and socially constituted agency.The Academy of Management Annals,7(1), pp.607-661.