Viacom

Viacom

Investment decisions call for the analysis of various factors that might affect the earnings and growth of a company. The indicators are internal, as well as external, and may be favorable or unfavorable for the growth of the organization. In this case, the investment decision is about Viacom. The first indicator is the organization’s size; where it has one of the most massive audiences in its niche (Britannica). That has the effect of exposing it to high potential revenue; because of the many people that use its services. Given the fact that the organization is significant is a favorable factor for investment. That is because the probable revenue is high, and the returns for its investors will be high accordingly. That is different from a small company; which might have the demerit of having a tiny audience; which limits the amount of revenue and returns on investment to its investors.

The other investment indicator that can be used for making a sound investment decision, in this case, is the Price-to-earnings ratio of the organization. Viacom’s has a price-to-earnings ratio of 6.31. One of its major competitors; Disney, has a ratio of 22.53; which is quite high and desirable for investors. However, the high price-to-earnings ratio is volatile; and, in most cases, is exaggerated by the organization so that they can be appealing to investors. In this case, investment in Viacom is more favorable; because it is less risky and is more likely to be an accurate reflection of the organization’s performance. Thus, investment in Viacom is favorable; because the investor will be assured of a realistic and steady earning throughout the tie of the investment. Therefore, in this case, it is advisable to invest in Viacom, for a long time, because the ratio is a good return on investment, realistic and can be managed by the organization for a long time.

Return on Equity is the other indicator that investors consider when making an investment decision. That is because it is the return they earn as a result of committing the investments in the organization being recognized. A higher return on Equity is favorable for investors and induces them into investing in an organization.  That is because for every dollar they invest in the organization, the associated return is higher; which makes the investment worth their attention. In this case of Viacom, the return on Equity is at 14.54% (Guru Focus).  That means that an investor will earn 14.54% from the initial capital they inject into the organization. That is a favorable indicator; given their immediate competitor has a return of 9.44%. Thus, it would be worthy for an investor to commit their resources in the organization.

Given a chance to invest in Viacom, I would take the opportunity and commit my resources in it. That decision to invest is informed by various factors, as highlighted above. First is the return on investment; which is, in most cases, the primary aim of any investor. That is because investors are rational, and they prefer higher and stable returns. Given the fact that Viacom has that type of returns, and then it forms a viable and profitable investment opportunity. Coupled with its large size and price-to-earnings ratio, the company makes a viable investment opportunity for an investor. Even though the organization has positive indicators, it has some negative indicators in its management. For example, the planning and development of the organization have come under criticism (Symbol, 2011). However, despite that, the organization has managed to perform great in its operations; which makes it an excellent investment for an investor.

References

The Editors of Encyclopaedia Britannica. (2012, October 10). Viacom Inc. Retrieved from https://www.britannica.com/topic/Viacom-Inc

Symbol, V. I. A., Cable, T. V., & Year, F. (2011). VIACOM INC. http://www.annualreports.com/HostedData/AnnualReportArchive/v/NYSE_VIAB_2010.pdf

Viacom PE Ratio. (n.d.). Retrieved from https://www.gurufocus.com/term/pettm/VIAB/PE-Ratiottm/Viacom-Inc