Monday, June 3, 2013

Comparing apples with pears...

Wolfram Alpha is an interesting search engine that provides a different set of data to user queries than 'plain vanilla' Google Search. If you throw Apple, Microsoft and Google for instance, in the search field it returns to you a whole bunch of data about the three companies, having guessed that you'd basically be interested in comparing the three from a financial performance point of view. It's the easiest way to compare any two or more companies with each other, if you know how to read some financials at the least. So, I did that search in order to write this post. The fancy table layout is also done by Wolfram. It's basically a cool site to provide many different types of data based on logical inferences, although not always too successful. For instance, my recent iPad search for 'Clinton, President' returned no data at all. Who knows what happened?!?!

The reason I printed this table today and decided to comment is based on the ol' saying: when numbers talk, bullshit walks.

We heard all sorts of negativity about Apple the last eight months, created in the market by competitors, speculators, hedgies, and plain frustrated Apple haters. Even as we speak, articles appear proclaiming 'time to give up on Apple stock'. On the other hand, reasonable analysts put their finger on the real issue about the stock, being the scores of thieving crooks (short sellers), who borrow thru their brokers and bankers AAPL stock owned by simple and ignorant investors, to massively short-sell it and make drop the trading price so they can cover themselves at the close of the day, and pocket hefty profits. In the process, they also make honest investors lose a lot of hard earned money, whereas regulatory bodies simply let them do, in the name of the Free markets in the Land of the Free...

Microsoft seems to have taken over Google in market cap, which is kind of curious, as I haven't read anything yet that would make anyone believe that Ballmer promises to steer Microsoft any better than the last ten years, any time soon. Really curious! Of course, despite the negativity, Apple is still head and shoulders above the two. It's the least one would expect with revenues more than double of each of the other two. Even better, Apple's revenues is larger than MSFT and GOOG added together. By 30% mind you!

One ratio I particularly like is the revenue per employee. For comparison, a good consulting firm is lucky if it gets more than $120K per employee (less than €100K), if it doesn't sell anything else than person-days, that is (ACN is on $117K). The bulk (more than 50%) of Apple's employees are hired in the Apple stores. In fact, one should subtract those to compare best with GOOG, but even so, Apple's leverage on its employees is almost 2.5 times larger than the other two. Wow, again!

Net Income perse as an absolute value is relevant for the piles of cash it generates, for sure, but tells us more when compared to revenues to yield profit margins. That ratio is not provided in this table, but a quick calculation yields:

AAPL: 23.45%, MSFT: 21,59% and GOOG: 20.76%. Wow again!

The BS we heard about Apple's declining profits and increased competition by the South Koreans, another bunch of copycats! How about the margins of MSFT and GOOG then? Where do they waste their hard earned revenues? Paying themselves obnoxious salaries and bonuses and changing their executive's private jets far too often? What's wrong with flying commercial?

Since the number of outstanding shares is unequal among the three, we need to normalize the Earnings per Share (EPS) number. Like if all had as many shares as Apple does (less than a billion). If you do that you get:

AAPL: 42,27, MSFT: 17,36 and GOOG: 12,23. Tired to shout Wow!

Now, how about P/E ratio? (Price over earnings). This is the stock price traded on the market over annual earnings per share. For AAPL it's 422.1/0.938 (price per share) / 42.27 (EPS) = 10.64. For MSFT this is 17.88 and GOOG 25.2 ! Even lousy Microsoft with the lousiest CEO on the planet, performs 70% better than AAPL. If this not stock manipulation, tell me what this is! Not to talk about GOOG selling hot air and pocketing this kind of return. Their time will eventually come, mark my words! Hedgies have no particular association (emotional or objective whatsoever) with any stock. They are simply greedy whores for hard cash. In Gordon Gekko's words "Greed is goooood!"

Finally, annual dividends being paid. I don't know where Wolfram got its numbers, but Apple's gross dividends (before tax) paid to shareholders is 3.05$ a quarter, which is 12,2$ annually or 2.7% based on last Friday's closing price. For MSFT this is 2,64% and GOOG's is simply zero! In other words, no recurring returns by Largey of their cash pile to shareholders. Rather spend some on fancy executive jets to carry Squirrel Boy around in his high profile PR spree of the last few years.

Like I said, when money talks...

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