Philips Vs Matsushita
Essay Preview: Philips Vs Matsushita
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Matsushita Electric Industrials (MEI) annual sales as on November, 07 is 77.5 Billion which is seven folds of Philips whose annual sales is 11.6 Billion gives an impression that MEI is a larger company. Also its ranking in the global 500 accounts is 158 as compared to Philips 184.
Here below is the intensive interpretation done from the given ratios of the two companies and the other giants. The comparison is done in vision to the Industry Median.
PROFITABILITY
After observing the profitability ratio of both the companies, there remains no doubt in the fact that MEI is making huge profits, compared to either Philips or to the market median. The only segment where MEI showed lower value is “Gross Profit Margin” where it lagged by 3.7% lesser value than of the Industry Median i.e. 33.50%.
The actual value of Return on invested value is really pathetic for Philips who is going in loss of 3.7% whereas MEI is making a good profit of 4.0% even higher than the industry median of 2.8%
VALUATION
A low price to sales ratio (for example, below 1.0) is usually thought to be a better investment since the investor is paying less for each unit of sales. However, sales dont reveal the whole picture, since the company might be unprofitable. MEI with 0.05 P/S Ratio is on safer side than of Philips -3.90.
price/earnings ratio. The most common measure of how expensive a stock is. The P/E ratio is equal to a stocks market capitalization divided by its after-tax earnings over a 12-month period,
The higher the P/E ratio, the more the market is willing to pay for each dollar of annual earnings. Companies with high P/E ratios are more likely to be considered “risky” investments than those with low P/E ratios, since a high P/E ratio signifies high expectations.
Comparing P/E ratios is most valuable for companies within the same industry. Philips with the P/E ratio of 19.53 seems to be a safer investments the industry median is 20.68 whereas MEI has a higher value of 22.80 which is interesting to note that investors have great expectations from the company.
It is calculated by dividing the current closing price of the stock by the latest quarters book value per share.
Also known as the “price-equity ratio”.
A lower P/B ratio could mean that the stock is undervalued. However, it could also mean that something is fundamentally wrong with the company. Philips Electronics P/B ratio of 6.03 which is higher than the industry median of 2.12 implies that investors expect management to create more value from a given set of assets. MEI plays at stable rate of 0.11
The price/cash flow ratio (also called price-to-cash flow ratio or P/CF), is a ratio used to compare a companys market value to its cash flow. It is calculated by dividing the companys market cap by the companys operating cash flow in the most recent fiscal year.
In theory, the lower a stocks price/cash flow ratio is, the better value that stock is. Thus it gives a clear picture that the investors of Matsushita Electric-0.80 are more happier than of Philips whose P/CF is as high as 22.22
OPERATIONS
In accountancy, Days Sales Outstanding is a companys average collection period. A low figure indicates that the company collects its outstanding receivables quickly. Therefore we see that Philips is conscious and generally make