Ostuni Limited is a Niagara-on-the-Lake, Ontario–based winery producing blended, premium, and ultrapremium wines, which are sold globally. The company has a strong distribution network in Canada through independent retail locations. The following information has been extracted from the company’s annual report.

Required

a. Calculate Ostuni’s price/earnings ratio from 2018 through 2020. Comment on whether the ratio’s trend over this period reflects a company with higher growth potential or one that has achieved maturity.

b. Calculate Ostuni’s dividend payout ratio and dividend yield for 2018 through 2020. What do the results of these ratios tell us about Ostuni Ltd.?

c. Calculate Ostuni’s return on equity ratio for 2019 and 2020. Note that Ostuni’s articles of incorporation authorize only common shares. Comment on how eff ectively Ostuni’s management has been able to use the equity of its shareholders to generate returns.

Transcribed Image Text:

2020 2018 2019 Market price per share Earnings per share Dividends per share Net income (in thousands) Shareholders' equity (in thousands) $ 5.07 0.36 $ 11,80 6.83 0.46 2$ 2$ 2$ 0.64 $ 0.163 $ 0.150 $ 15,590 $157,736 $ 0.140 $ 12,198 $ 21,363 $147,375 $177,317