Executive summary
This report is based on the company Burberry Group Plc (Ticker symbol – BRBY.L). The business operations comprise of designing, development, manufacturing and sales of luxury goods for men, women and children. It is a geographically diversified brand with strong brand image all over the world. Since Burberry operates in the luxury goods segment, economic recession would severely impact the revenues of the company as these are discretionary items. There is intense competition from players such as Louis Vuitton, Ralph Lauren, etc. and Burberry needs to innovate to maintain its brand image.
On the basis of ratio analysis, it was seen that the financial health of the company with respect to the industry is good, but it has been deteriorating over the period 2014 – 17. Therefore, the company needs to develop strategies to improve its profit margins and optimize the inventory policy. Rising inventory holding costs and risks of obsolescence of inventory can adversely affect the profit margins, thereby making it imperative to align the inventory turnover ratio with the industry standards.

The weighted average cost of capital for Burberry is 6.85% and it has not issued any long term debt. As per the abnormal earnings model, the intrinsic value has been estimated to be GBP 481.97 and this implies that the stock is overpriced at the current levels of GBP 1761. Similar results were obtained through DCF valuation which yielded an intrinsic value of GBP 918.37. As such, “SELL” rating is issued to the stock as it appears to be overpriced with respect to the industry benchmark also. However, the opinion is highly subjective and dependent on the state of environment. Shift in strategy or operating environment can cause the recommendation to change.

Introduction
This report is based on the company Burberry Group Plc (Ticker symbol – BRBY.L). The foundation of the company dates back to 1856 and since then, it has grown to become one of the largest luxury brands in the world. It is headquartered in London, United Kingdom. The business operations comprise of designing, development, manufacturing and sales of luxury goods for men, women and children. Its flagship brand Burberry is well recognized across Asia Pacific, Europe, Americas, Middle East and Africa. It deals in apparel as well as accessories such as leather goods, handbags, etc. (Yahoo Finance, 2017).

Strategic analysis
Burberry is a high-end luxury brand which has developed strong brand reputation over the years through targeted marketing and positioning strategies. It is geographically diversified across several economies and has a diverse product portfolio that caters to the millennials as well as older generation. SWOT analysis has been conducted to assess its strategic positioning as shown below.

Since Burberry operates in the luxury goods segment, economic recession would severely impact the revenues of the company as these are discretionary items. There is intense competition from players such as Louis Vuitton, Ralph Lauren, etc. and Burberry needs to innovate to maintain its brand image.

Financial analysis
Ratio analysis has been used to analyze the performance of the company over the period 2014 – 2017 to understand the trends in financial performance. In order to assess the competitive standing of the company, cross sectional analysis has also been done using industry benchmarks to evaluate the performance of the company with respect to peers.

Efficiency analysis
The key ratios have been summarized under

Using the simple time value of money concepts you learned in the Co...