Earnings Challenge E4｜Invest wiser with the P/B ratio in mind
Event Description:
This event is to help mooers learn more about the differences among companies and industries, review Fundamental Analysis indicators, and better navigate the market.
"Investing is not about beating others at their game. It's about controlling yourself at your own game. The intelligent investor is a realist who sells to optimists and buys from pessimists." —Benjamin Graham
Challenge Start >>
Rewards
1) 4,000 points: The first 200 users who give correct answers to Questions 1 and 2 will get an equal share of 4,000 points. (e.g., If 100 users win, each user will get 40 points.)
2) Cash Coupons: 3 users who give the best-quality comments will get USD 2 / SGD 2.8 cash coupons. (You can share investment idea, trading experience, and exploration of why Market Cap deviates among the companies.)
Questions
1. What companies do Company A, Company B, and Company C refer to respectively?
2. What's the ranking of Company A, B and C in terms of Market Capitalization?
Reference answer form: A>B>C or A<B<C or C<A≈B (within 10% deviation)
Tips: You can refer to the companies' P/B ratio information below.
Market capitalization = P/B ratio*Book value of assets.
Company A：
This company is an American multinational energy company headquartered in Houston. It specializes in the production of natural gas liquids and petrochemicals. In FY2021, it had total revenue of over $111billion. The current P/B ratio is about 1.9.
Company B：
This company was founded in 1920 as an integrated oil monopoly and is headquartered in Los Angeles. It produces, sells and transports petroleum, natural gas and other chemical products. Warren Buffett is loading up on it this year. The current P/B ratio is about 3.5.
Company C:
The company was founded in 1873 and is headquartered in London. It engages in the exploration, mining, and processing of mineral resources. Its name is Spanish, meaning yellow river. The current P/B ratio is about 1.8.
More Hint:
*Finding path: moomoo App → Markets→ Explore→ Stock Compare
How to Play?
Add the stock tickers (e.g., $Tesla(TSLA.US)$) to your answers, plus the Market Cap comparison and related investment ideas if you have any.
Event Period: October 14–October 20
Earnings Wiki:
All about the P/B ratio
Definition: The Price-to-Book ratio（P/B ratio）is a firm's stock price per share to its book value per share. The market value of equity is typically higher than the company's book value.
The P/B ratio measures the market's valuation of a company relative to its book value.
● Common Formula: P/B ratio = Market Price per Share/ [ (Total assets - Total liabilities) / Number of shares outstanding)]
If we change the formula side,
→ Phase one: Market Price per Share = P/B ratio*(Total assets - Total liabilities) / Number of shares outstanding)
If we multiply the shares in both sides,
→ Phase two: Market capitalization = P/B ratio*Book value of assets
Common Usage: Generally, the P/B ratio indicates whether investors pay too much for what would remain if the company went bankrupt. A lower P/B ratio could mean the stock is undervalued. Whereas, it could also mean something is wrong with the company.
The P/E ratio we talked about in E3 mainly applies to companies with stable returns. In contrast, the P/B ratio works better for companies with unstable earnings in cyclical industries, such as the oil, natural gas, and steel. That's because cyclical industries' profits are tied to resource prices or business cycles. Resource prices swing cyclically, and so does the profitability of the companies. But these firms generally have stable net assets values, making the P/B ratio a better indicator for this kind of corporate valuation.
Disclaimer:
This presentation is for informational and educational use only and is not a recommendation or endorsement of any particular investment or investment strategy. Investment information provided in this content is general in nature, strictly for illustrative purposes, and may not be appropriate for all investors. It is provided without respect to individual investors’ financial sophistication, financial situation, investment objectives, investing time horizon, or risk tolerance. You should consider the appropriateness of this information having regard to your relevant personal circumstances before making any investment decisions. Past investment performance does not indicate or guarantee future success. Returns will vary, and all investments carry risks, including loss of principal. Moomoo makes no representation or warranty as to its adequacy, completeness, accuracy or timeliness for any particular purpose of the above content.
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Spritz : A. $Phillips 66 (PSX.US)$
B. $Occidental Petroleum (OXY.US)$
C. $Rio Tinto (RIO.US)$
Market Capitalization : C > B > A
Milk The Cow : Company A: $Phillips 66 (PSX.US)$
Company B: $Occidental Petroleum (OXY.US)$
Company C: $Rio Tinto (RIO.US)$
Market Capitalization : C > B > A
矜重的比尔 : A. $Phillips 66 (PSX.US)$
B. $Occidental Petroleum (OXY.US)$
C. $Rio Tinto (RIO.US)$
Market capitalization: C>B>A
Ah keong : B. $Western Petroleum (OXY.US) $
Ah keong : A. $Phillips 66 (PSX.US)$
B. $Occidental Petroleum (OXY.US)$
C. $Rio Tinto (RIO.US)$Market capitalization: C > B > A
103047546 : A. $Phillips 66 (PSX.US)$
B. $Occidental Petroleum (OXY.US)$
C. $Rio Tinto (RIO.US)$
Market capitalization: C > B > A
阿姚朋友 : A. $Phillips 66 (PSX.US)$
Phillips 66 is engaged in the processing, transportation, storage and sale of fuel and other related products. The company's business scope includes: mid-stream, chemical, refining, marketing and professional. The middle section provides crude oil and oil products transport, terminal and processing services, as well as natural gas and liquefied petroleum gas transport, storage, processing and sales services. The Chemicals Division produces and sells petrochemical products and plastics globally. The refining department refines crude oil and other raw materials into petroleum products such as gasoline, distillates and aviation fuel. The marketing and professional sectors refine petroleum products, such as base oils and lubricants, as well as power generation for resale and market. Phillips 66 was founded on April 30, 2012 and is headquartered in Houston, Texas.
B. $Occidental Petroleum (OXY.US)$
Western Oil is the fourth largest oil and gas company in the United States, engaged in oil and gas exploration and production. Its business scope includes: oil and gas, chemical, mid-stream and marketing. Exploration in the field of oil and natural gas, development and production of oil and condensate, liquid natural gas and natural gas. The chemical field produces and markets basic chemicals and vinyl. Middle reaches & Marketing parts: procurement, marketing, collection, processing, transmission and storage of oil, condensation, liquid natural gas, natural gas, carbon dioxide and power. The company also trades around assets such as transport and storage capacity. The company was founded in 1920 and is headquartered in Houston, Texas.
C. $Rio Tinto (RIO.US)$
Rio Tinto PLC Co., Ltd. is a multinational mineral and resources company. In addition to the most famous iron ore, Rio Tinto PLC is also the world's largest aluminum company, as well as coal, iron, copper, gold, diamond, energy and other businesses. Engaged in the exploration, exploitation and processing of mineral resources. Rio Tinto PLC was founded in 1873 and is headquartered in London, England.
Market capitalization: C > B > A
blackwhitebird : Company A: Phillips 66(PSX.US)
Company B: Occidental Petroleum(OXY.US)
Company C: Rio Tinto(RIO.US)$
Market Capitalization : C > B > A
Wallace US : A. $Phillips 66 (PSX.US)$
B. $Occidental Petroleum (OXY.US)$
C. $Rio Tinto (RIO.US)$
Market capitalization: C > B > A
quiet Buffalo_q7l : A. $Phillips 66 (PSX.US)$
B. $Occidental Petroleum (OXY.US)$
C. $Rio Tinto (RIO.US)$
Market Capitalization : C > B > A
Valuations can defer due to revenue projections or margins. Keeping my eye out for OXY since Buffett has been buying and oil prices aren't going down.
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