Earnings Challenge E2｜Invest wiser with ROE in mind
This event is to help mooers learn more about the differences among companies and industries, review Fundamental Analysis indicators, and better navigate the market.
"In the business world, the rear-view mirror is always clearer than the windshield. If a business does well, the stock eventually follows." -- Warren Buffett
"In the business world, the rear-view mirror is always clearer than the windshield. If a business does well, the stock eventually follows." -- Warren Buffett
Challenge Start>>
Rewards
1) 4000 points giveaways: The first 200 users who give correct answers of Questions 1 and 2 will receive an equal share of 4,000 points. (e.g. if 100 users win, each user will receive 40 points.)
2) Cash Coupons: 3 users who give the best-quality comments will get US$2 / SG$2.8 cash coupons. (including your investment idea, trading experience, or the exploration of Market Cap deviation reasons among the companies)
Questions
Questions
1. Can you guess which companies they are for Companies A-C?
2. Can you guess which company's Market Capitalization is larger, similar or smaller currently?
e.g. The answer: A>B>C or A<B<C or C<A≈B (within 10% deviation), etc.
Tips: Combine with the companies' ROE information below.
Company A：
The company's predecessor grew from a small farm to one of the world's largest producers of nutritious foods. It was spun off and traded separately in 2012, with the original snack and food brands.
Company B：
The company is the world's largest liquor company, with a range of top brands spanning distilled spirits, wine and beer. It has the world's number one selling whiskey brand, which has maintained classic craftsmanship and taste.
Company C:
The company is the world's leading beverage and snack food company. For two years in a row, it was ranked No. 1 on Fortune's list of the World's Most Admired Beverage Companies. Its interesting ads related to the competitor has been widely discussed.
How to attend this event?
Add the stock tickers (e.g. $Tesla(TSLA.US)$) to your answers below with the Market Cap comparison, and related investment ideas if you have.
Event Duration: September 16 - September 19
Earnings Wiki:
What's the Return On Equity?
Return on Equity (ROE) refers to a financial ratio that indicates how profitable a company is relative to its shareholders' equity. It can be used to measure how efficiently a company utilizes its equity to generate profit.
ROE is considered the return on net assets because shareholders' equity is equal to a company's assets minus its liabilities.
ROE is considered the return on net assets because shareholders' equity is equal to a company's assets minus its liabilities.
● Common Formula: ROE = Net Income/[(Ending Shareholders' Equity + Beginning Shareholderss' Equity)/2]
* The measuring period is usually an annual period.
Generally, a higher ROE may indicate a better company or stock. But ROE may not always be a good thing. An outsized ROE can show problems, such as inconsistent profits or excessive debt. Also, a negative ROE due to the company having a net loss or negative shareholders' equity is not a helpful metric to analyze the firm, nor can it be compared to companies with a positive ROE.
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Xiaoxi_penguin : Company A is $Mondelez International (MDLZ.US)$ , which had a ROE of 15.40% 2021/FY.
Company B is $Diageo (DEO.US)$, which had a ROE of 38.92% 2021/FY.
Company C is $PepsiCo (PEP.US)$, which had a ROE of 51.65% 2021/FY.
In terms of market capitalization, as of 2022:
Company A - $81.64B
Company B - $100.25B
Company C - $228.92B
Thus, in terms of current market capitalization, C>B>A
MDLZ had a continuous rise of market capitalization from 2019 ($79.04B) to 2021 ($92.50B). It drops by 11.74% this year. The result is quite unpredictable looking at how it bounced back strongly during early 2020. Although it seems to be well prepared for inflation environment, it does have some issue with the supply chain as well as strong competitors (being trumped by Mars. Inc and Ferraro Group, while only narrowly ahead of Hershey and Nestle). Thus if it is able to overcome supply chain issue and build up a more competitive advantage in its product, it will most likely use inflation times as its advantage to rise its market value. Short term investment doesn’t seem to be a likely choice but if looking for a long term investment , it does have potential.
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Xiaoxi_penguin : ... continue previous comment line ...
DEO had a constant fluctuations in market capitalization between loss and gain for the past 6 years. Its inconsistency is quite a worry, although it has a 38.17 ROE 2021/ FY, which was actually the second highest for the past 22 years. If it keeps up the trend starting from the last 6 years, it will bounce back from -20.9% market capitalization 2022 to a positive change in 2023. High inflation is one of the major issue that DEO faces which heavily rely on consumer demands, which shows weakness in broader market , resulting in increase interest rate and disruption in supply chain. Looking at the current economy, citizens are more reliant on food rather than liquor, thus a comeback would be quite difficult until they are able to broaden its market or when economy regains its status. In terms of investment, don’t think I would choose this unless it shows signs of positive change in market strategy.
PepsiCo is the most stable company among the 3 stated companies in terms of market capitalization. It has a loss in market capitalization in the year 2001, 2008, 2018 and 2022. The rest are all positive growth and with the most rapid speed amongst the 3. Competitive market environment would be the biggest challenge it will face, along with environmental concern and health concern. However looking at the past 22 years record, I’m quite positive that PepsiCo is able to make a come back by 2023. However the immense competition and pressure isn’t to be neglected. Thus I would revise a diversified portfolio in regards to PepsiCo with no more than a fifth until they show signs that they are able to tackle those problems .
This is just a personal evaluation and thoughts so please don’t take this as an advice. I’m just a beginner who just knew what is an investment a week ago and still learning. Let’s all have fun together ^-^
Spritz : A. $Mondelez International (MDLZ.US)$
B. $Diageo (DEO.US)$
C. $PepsiCo (PEP.US)$
Market Capitalization : C > B > A
ZnWC : A: $Mondelez International (MDLZ.US)$
B: $Diageo (DEO.US)$
C: $PepsiCo (PEP.US)$
Market Capitalization: C > B > A
ZnWC : Know the history or past data of a stock (looking at rear mirror) is important because it will shape your value and future decision. However there's also another saying "Past Performance Is Not Indicative Of Future Results"
Limitations of Return on Equity
A high ROE might not always be positive. An outsize ROE can be indicative of a number of issues—such as inconsistent profits or excessive debt. Also, a negative ROE due to the company having a net loss or negative shareholders’ equity cannot be used to analyze the company, nor can it be used to compare against companies with a positive ROE.
Personally I seldom use ROE to analyze the value of a stock. There are also other common indicators eg P/E ratio.
Picking a right stock is important, more importantly is your investment objective and holding power.
romancer Xiaoxi_penguin:
Milk The Cow : Company A: $Mondelez International (MDLZ.US)$
Company B: $Diageo (DEO.US)$
Company C: $PepsiCo (PEP.US)$
Market Capitalization: C > B > A
romancer : Company names:
A. $Mondelez International (MDLZ.US)$
B. $Diageo (DEO.US)$
C. $PepsiCo (PEP.US)$
Market Capitalization : C > B > A
Milk The Cow Milk The Cow: High ROE, usually mean is a good company
+
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hanabi3 : A) $Mondelez International (MDLZ.US)$
B) $Diageo (DEO.US)$
C) $PepsiCo (PEP.US)$
Market Capitalization: C>B>A
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