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GTDC Financial Benchmarks

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GTDC Financial Benchmarks. Comparing and Contrasting the Financial Performance of ... After lagging the vendors' growth from 2001 to 2003, the distributors' sales ... – PowerPoint PPT presentation

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Title: GTDC Financial Benchmarks


1
  • GTDC Financial Benchmarks

Comparing and Contrasting the Financial
Performance of IT Distribution and IT Vendors
2
Sales Growth
  • After lagging the vendors growth from 2001 to
    2003, the distributors sales growth of 14 and
    9 exceeded the vendors sales growth of 12 and
    6 in 2004 and 2005, respectively.

Vendors
Distributors
20
15
Adjusted Sales Growth
10
5
0
-5
-10
-15
2001
2002
2003
2004
2005
  • Excludes ARW and AVT electronic components sales
    and IBM service revenue
  • Vendors AAPL, CSCO, EMC, HP, IBM, MSFT, SUNW /
    Distributors AGYS, ARW, AVT, BELM, IM, SNX, TECD

3
Distributors Gross Margin
  • From 2001 to 2005, the distributors gross
    margins declined slightly from 8.6 to 7.9.

4
Distributor SGA as of Sales
  • Lower operating expenses as a percent of sales
    from 7.1 in 2001 to 6.0 in 2005 more than
    offset the slight decline in gross margins.
    Distributors have done an excellent job improving
    productivity and increasing efficiency since
    2001.

5
Operating Income Growth
  • As a result of productivity gains, the
    distributors operating income grew 65 and 13
    compared to 21 and 12 for the vendors in 2004
    and 2005 respectively.

6
Distributors Operating Margin
  • As a result of productivity gains, the
    distributors operating margin grew to 1.9 and
    2.0 in 2004 and 2005 respectively.

7
Working Capital Velocity
  • From 2001 to 2005, the distributors have improved
    working capital turns from 8.5x to 9.9x,
    significantly exceeding the vendors turns.

8
Net Income Growth
  • Following 112 net income growth in 2004, which
    significantly outpaced the vendors net income
    growth of 21, the distributors growth fell back
    to a more normalized level of 12 in 2005 versus
    the vendors growth of 21.

9
Distributors Net Margin
  • The distributors net margin grew to 1.1 in both
    2004 and 2005 respectively.

10
Distributors ROWC and ROIC
  • Since the trough in 2002, the distributors ROWC
    and ROIC have improved and over the past two
    years both metrics have exceeded the average cost
    of capital.

Assumes a 10 Average Cost of Capital
11
Valuation Ratios
12
Relative Stock Performance
  • The distributors stocks have outperformed the
    vendors stocks over the past five years.

13
Key Points
  • Over the last two years, distributor sales have
    outpaced key IT vendor sales.
  • Operating income growth was greater for the
    distributors than for the vendors in 2004 and
    2005.
  • In 2004 and 2005, the distributors returns have
    exceeded their cost of capital.
  • The distributors valuations are significantly
    lower than the vendors.
  • An investment in distribution provides a
    diversified, lower risk approach to the
    technology sector.
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