Background of Company MSC Industrial Direct is an MRO (maintenance, repair, and overhaul) distributor focused on the metalworking industry (Bloomberg). MSC makes their money through the retail of industrial products such as tools, hardware, fittings, valves, and raw materials. Besides local competitors, the only real competition that MSC Industrial Direct has is Amazon. There is a fear about price competition from online competitors like Amazon. However, the competition in MRO distribution is not based on price as it is based on total cost. MSC Industrial Direct does not price below their competitors, however, their market share continues to rise. There are things that Amazon cannot do that MSC can do that makes them stand out. Amazon cannot …show more content…
Inventory Turnover “is a ratio showing how many times a company's inventory is sold and replaced over a period of time” (Investopedia). The industry average for Inventory Turnover is 4.01 while MSC Industrial Direct’s ratio is 3.59. This shows that MSC Industrial Direct is inefficient in this aspect as based on the ratios, they have weaker sales and excess inventory compared to their competitors. Asset Turnover is another way to assess the efficiency of a company. Asset Turnover “is the ratio of the value of a company’s sales or revenues generated relative to the value of its assets” (Investopedia). The industry average for Asset Turnover is 1.52 as MSC Industrial Direct’s ratio is 1.39. This again shows that the company is inefficient as it is below the industry average in Asset Turnover and Inventory Turnover. Being lower in Asset Turnover means that the company is generating less revenue per dollar of assets as compared to its competitors. Their inefficiency as a company shows that they are struggling to bring in …show more content…
Based on their financial analysis, this company is struggling. They are not profitable and are very inefficient which means their weak sales are hindering the company. With a powerhouse competitor like Amazon, it would not make sense to invest in a metalworking retailer that struggles to even make profit. Although it seems that MSC Industrial Direct is the head of the metalworking industry at the moment because their competitors, like Amazon, cannot produce to customers like they do, it is still very likely with Amazon continuing to grow as a company to be able to be fully capable of taking control of the metalworking industry. Ergo, at this moment, investing in MSC Industrial Direct would just not be a smart move because of their lack of substantial success and their dismal future. However, if they do in the future maybe partner with Amazon, then they would be a company that would be worth investing in as Amazon would drive up their production and