Finance Case Study Sample

Canada had many investment management firms with Saxon being one of them. At the time of its inception in 2005, Saxon was not rated among the top 25 essentially because it was a very small firm. Saxon engaged in al the three segments of the asset management industry namely mutual funds, private clients as well as institutional asset management. In the beginning, Canadian Medical Association was the largest shareholder.

Operating environment

Success or failure of an individual company, an industry or an economic subsector is heavily dependent on the operating environment. This environment may either be internal or external. The financial market management industry in Canada has also been affected by this environment. Some of the factors that affected Saxon Financial Inc were;
Increased demand by savers:- the demand for savings vehicles was on steady increase where by its inflows were up to 4% of the total assets invested.

Political stability Canada is one of the most stable countries politically. This stability boosts the confidence of any business operating in such an environment. Saxon was not exceptional.

Value drivers provide a competitive advantage to a product by increasing the general value of the product thus improving customers’ perception of the product or service. Saxon mutual fund value drivers can be summed up as;

1. Captive customer base

Saxon’s relationship with CMA Holdings has been of great value addition to the fund. CMA was Saxon’s largest client bringing in an asset base of .2 billion which are currently pursuing several mandates. One of the subsidiaries of Saxon, MD Management takes up the larger third party distribution channel for the said Mutual Fund. The fact that CMA represents all the doctors in Canada means that Saxon is able to provide mutual funds to high income earners with a great ability to invest. Moreover, this is a ready market which eliminates the factors of market uncertainty in the near future.
2. Low fee mutual funds
Saxon remains one of Canada’s small investment funds and hence to attract a larger customer base, the company is forced to offer their services at a cheaper price than the rest. This gives Saxon an option of using the price as their competitive advantage
3. Good reputation

Saxon investment was known for being a good stock picker. In this case, the company was well known for its ability to choose the best and most profitable investments for its customers to invest in.
Trailing PE
It is based on net income for the preceding twelve month period.
Trailing P/E ratio= Current Share price/ preceding twelve months earning per hare

Forward PE

Unlike the trailing PE, the forward PE is based on future income. The net income for the next twelve months is predicted and that is what is used to calculate forward PE.
As noted, during the current financial year, both companies are expected to grow at a fair rate. However, future predictions are that Saxon earnings are performing better. However, what is clear is that both companies are expected to perform worse in the year to come. This could be because of undervalued stocks or that the current years earnings were higher than the next.
Relative PE
This is the PE ratio of a firm compared to the market PE.
Relative PE=PE of firm/Market Average PE