Fedex vs Ups

Financial analysis:

UPS appears to be the better stock for long term because its historical financial results are superior and more consists when compared to FedEx. To analyze both firms performance we consider to evaluate EVA (Economic value Added) analysis. It very important to analyze EVA for any firm because it measures firm’s performance over a given period of time compared to how it could have performed. This ration considers both economic profit and accounting profit. Some of advantages and disadvantages for this ratio includes, this ratio is useful when consider on only on single performance number that is economic profit. This is measurement is best because it contains so much info about both balance sheet and income statement numbers. It is also best metric if the firm had tangible assets that are correlated with market value. This is very useful when companies mature stage like UPS and FedEx. Disadvantage for this measurements is it only considers one metric and it doesn’t suitable to firms have intangible assets.

Based on this ratio advantages UPS and FedEx don’t have intangible assets. So we consider EVA (Economic value added) as key ratio for evaluating between two firms, based on our analysis UPS is clearly the better performer. In a 12 years period from 1992 to 2003 UPS created 4.32 billion dollars in cumulative economic value , while FedEx destroyed 2.25 billion dollars. Because of superior profitability and cash generating capabilities, UPS has better prospects for future growth based on their internal and external resources. Even considering past historical data to predict future growth for both firms based on financial and management performance, UPS is better than FedEx.

UPS outperformed FedEx on profitably over the years 1992-2003 with an average RONA 13.78% compared to 8.31% for FedEx. This profitability differences accounts for most of their EVA histories. The twelve year average cost of capital/WACC for each firm was virtually equal....