Principles of Business Finance Lab
fzTO: Hongxian Zhang
FROM: Jean Pierre Sanchez
DATE: April 25, 2013
SUBJECT: Dillard’s Inc, (DDS)
The Stock Plot that is located in page 3 was used to compare Dillard’s (DDS) stock price versus the stock price of S&P 500 (GSPC). The data on the chart includes the stock prices for the years of 2008 through 2012. We can observe that Dillard’s stock price has varied greatly from that of the S&P500. Another observation that we can make is that over the past five years, Dillard’s has significantly been increasing the value of its stock. The stock plot also helps us answer the question in regards to the volatility of the stock. We can see that Dillard’s stock has been especially volatile from year 2010.
In the Stock Return Graph that is located on page 3, we are comparing between Dillard's stock return versus S&P500’s stock return. Looking at the same time period from the year 2008 through 2012 we can observe that Dillard’s stock return is much higher than S&P500’s stock return. We can also observe that the returns between these two stocks have varied significantly. Finally, we can make the observation that Dillard’s has been more variable than the return on the S&P500.
Beta can be defined as a tool to measure the volatility or systematic risk of a stock or portfolio. It is useful because from a glance we can see how Dillard’s stock return responds to swings in the market. In the Monthly Holding Period Returns Chart located on page 4, we can see the calculated beta for Dillard’s of having β2.506, meaning that Dillard’s is a very volatile stock and it is more volatile than the market. YCHARTS.com calculated Dillard’s β at 1.86 meaning that Dillard’s stock is 80% more volatile than the market.
Over the past three years, it can be observed that Dillard’s has been slowly increasing its debt ratio; however the firm is still standing in good health. When we judge