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Serious Money: Metrics anyone? -- AAPL, EBAY, GE, GOOG, MSFT, TWX, WMT, YHOO

Posted May 12th 2008 10:57AM by Sheldon Liber
Filed under: Management, Google (GOOG), Microsoft (MSFT), Yahoo! (YHOO), Apple Inc (AAPL), eBay (EBAY), General Electric (GE), Time Warner (TWX), Wal-Mart (WMT), Berkshire Hathaway (BRK.A), Serious Money

About a month ago I posted Serious Money: AAPL, EBAY, GE, GOOG, MSFT, TWX, WMT, YHOO -- one more look, covering the original Great Eight stocks we focused on at BloggingStocks. These were based on reader interest, which they do still generate today.

Apple Inc. (NASDAQ: AAPL) was the big winner among only four that had appreciated. The following indicates commonly used metrics for tracking and comparing stocks.

Reviewing the stocks in order of lowest to highest P/E ratio (TTM):

It is interesting to note that only two of the eight have a below market P/E ratio, while only two are average. On the other hand, four are double the average and beyond, which leads me to believe the overall market consensus is that it is still very early in the game for these stocks and their futures are yet to be determined. The P/E ratios of the four are also the most volatile as are the stock prices.

Reviewing the stocks in order of lowest to highest P/S ratio (TTM):

Historically, the price-to-sales ratio is said to have greater bearing on the future stock appreciation than the P/E ratio. Only the top three stocks would be of interest from this perspective. Regardless of the long-term facts, in the past couple of years, Apple and Google have done much better than Wal-Mart and Time Warner.

Reviewing the stocks in order of lowest to highest Return on Equity (TTM):

The RoE is a common measure of company management effectiveness. If this is your guide and you are a Yahoo shareholder, then you might have a strong desire to see Microsoft's unsuccessful bid for Yahoo be accepted. Even if you did not get the full value based on CEO Jerry Yang's vision (or ego), you might see far greater growth under the new management.

Reviewing the stocks in order of lowest to highest Return on Assets (TTM):

The RoA makes Yahoo's management seem even more inept, earning only a fraction of Microsoft's shareholder value. My pal Warren would frown on Yahoo's poor showing in these categories. Providing shareholder value is chief among his pursuits, and since he is the largest shareholder of Berkshire Hathaway (NYSE: BRK.A), he continues to benefit the most from this goal.

It is impossible to predict the future with any great reliability or consistency, but if one were to look for a secure investment for the future with demonstrated success and the potential of being a part of growing industries, then only Microsoft appears to fit the bill. It is the only company among the eight that is fairly priced and increases shareholder value in a big way based on these metrics.

Two other criteria I look at but did not review here are dividends and cash-flow. In that regard, Microsoft would also prove rewarding.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money. Disclosure: I own shares of BRK.B, EBAY, and TWX.

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