Maybe you’ve seen the recently published results for the top 100 companies to work for. Five publicly traded companies made it into the top 25. It's very interesting to note that privately held companies bested public companies by almost 5 to 1 in that top 25 tranche — perhaps a subject for another day. I’m going to analyze these five from the paradigm of a value investor and see how they stack up. I’ll contrast these "great places" to work with a "not so great" rival and see if good places to work equate with good places to invest. In the reverse order of finish:
The Goldman Sachs Group Inc. (GS, Financial) ranked # 23 and is a large cap ($43.18 billion) in the financial sector trading at about $87.70. GS employs 36,800 and has seen a 7% growth in staff. Each Goldman Sachs full-time equivalent contributes $102,174 to the company’s annual net earnings. GS’s price/earnings ratio is 13.34 with a price/earnings growth ratio of 1.77. Return on equity is a modest 7.86%. Price to book is a fractional 0.64. The debt equity ratio is an appalling 687.01 (the result of bailout funds) but the current ratio is a comfortable 1.47.
Morgan Stanley (MS, Financial) is a large cap ($27.29 billion) in the financial sector trading at about $14.16. Each Morgan Stanley full-time equivalent contributes $47,248 to the company’s net annual earnings. MS’s price/earnings ratio is 9.29 with a price/earnings growth ratio of 1.21. Price to book for this investment banking giant is also fractional at 0.45. Return on equity is slightly above GS’s at 8.69%. As a bailout recipient, the debt/equity ratio is in the basement at 592.18 but the current ratio is a solid 1.66.
Goldman Sachs’ employees contribute to the net income of the firm at better than 2 to 1 compared to their counterparts at Morgan Stanley. Maybe happiness is making money or, alternatively, maybe making money is highly rewarded. Either way, Goldman Sachs is the clear winner in this category. As an investment, I’m not so keen on either one.
Cisco Systems Inc. (CSCO, Financial) ranked # 20 and is a large cap ($95.10 billion) in the technology sector trading at about $17.69. CSCO employs 71,825 and has witnessed a 3% increase in personnel. Each Cisco full-time equivalent contributes $88,270 to the company’s annual net earnings. CSCO’s price/earnings ratio of 15.28 is okay but falls a bit short of ideal for the value investor. The price/earnings growth ratio is similarly deficient at 1.19. The price to book is within range at 2.01 and return on equity disappoints at 13.79%. Both the debt/equity and current ratios are exemplary at 35.70 and 3.28 respectively.
Alcatel-Lucent S.A. (ALU, Financial) is a mid cap ($3.15 billion) in the technology sector trading at about $1.39. ALU employs 79,796… Each Alcatel-Lucent full-time equivalent contributes $9,209 to the company’s net annual earnings. The twelve month trailing price/earnings ratio is 4.47 and the fractional price/earnings growth ratio of 0.44 are both attractive fundamentals, as is the price to book of 0.87. Return on equity is a respectable 19.23%. The debt equity ratio of 129.63 disappoints but the current ratio of 1.32 is acceptable.
From an investment standpoint, I’ll subordinate my misgivings in the price/earning and price/earnings growth ratios and select CSCO over ALU. I just can’t abide ALU’s debt/equity ratio and I am impressed by the comparative net income per employee statistics which clearly favor Cisco Systems.
DreamWorks Animation SKG Inc. (DWA, Financial) ranked # 10 and is a small cap ($1.41 billion) in the services sector trading at about $16.82. DWA employs 2,100 and has expanded its staff by 10%. Each Dreamworks full-time equivalent contributes $70,362 to the company’s net annual earnings. . DWA’s price/earnings ratio is 9.68 and the price/earnings growth ratio is 6.92. Price to book is 1.06. Return on equity is reported at 11.84%. The company has no long term debt. As a result, the debt/equity ratio is zero. The current ratio is 3.60.
Regrettably, there is no publicly held company against which DreamWorks can be fairly measured. Worse still, the privately held companies do not provide all the information necessary to make a direct comparison.
The net income per employee statistic seems impressive and happy employeesare productive employees, or so I’m told! Absent a publicly traded company to match-up with we are left to our assumptions, which can be flawed. As an investment, I would have to pass on DWA from the perspective of a value investor.
NetApp Inc. (NTAP, Financial) ranked # 5 and is a large cap ($12.61 billion) in the technology sector and trading at about $35.16. NTAP employs 11,500 and has increased staff by 9%. Each NetApp full-time equivalent contributes $56,704 to the company’s annual net earnings. NetApp’s price/earnings ratio is 21.43 and its price/earnings growth ratio is 0.91. The price to book of 3.32 coupled with the price/earnings ratio takes this one out of value stock territory. Return on equity is unremarkable at 18.60%, however, the debt/equity ratio and current ratio of 30.92 and 2.75 are quite remarkable.
EMC Corporation (EMC, Financial) is a large cap ($44.78 billion) in the technology sector and trading at about $21.95. EMC employs 48,500 full-time equivalents, each contributing $46,598 to the company’s annual net earnings. The price/earnings ratio is almost equal to NetApp at 21.84 and the price/earnings growth ratio is a close match at 0.87. Price to book, however, is significantly better at 2.50. Return on equity falters at 13.15%. The debt equity and current ratios are near perfect at 18.22 and 1.00 respectively but I prefer the NetApp fundamentals in these two areas.
The “best place to work” again turns out to be the place where the employee makes the higher contribution to net income. Is it coincidence that compared to their rival, they seem to be the better investment opportunity as well?
Google Inc. (GOOG, Financial) ranked # 4 and is a large cap ($201.40 billion) in the technology sector and trading at about $621.83. GOOG employs 31,353 and has no figures to report regarding their growth in staff. Each Google full-time equivalent contributes $305,553 to the company’s annual net earnings. Google’s price/earnings ratio is 21.20 and its price/earnings growth ratio is 0.89. Price to book is 3.67. Return on equity is a tolerable 19.52% and debt/equity and current ratios are 13.24 and 5.63 respectively. As other contributors have noted, Google is gagging on cash!
Yahoo! Inc. (YHOO, Financial) is a large cap ($18.13 billion) in the technology sector and trading at about $14.62. YHOO employs 13,600 and each of Yahoo! s full-time equivalents contributes $74,044 to the company’s annual net earnings. Yahoo!’s price/earnings ratio is 17.89 and its price/earnings growth ratio is 1.43. Price to book is a favorable 1.45. Return on equity is a dreary 8.77% which is in stark contrast to a sunny debt/equity ratio of 0.31 and beaming current ratio of 2.83.
Once again, the most attractive company from an investor’s standpoint is also the “best place to work” and the “best place to work” also has the highest level of productivity as expressed in net earnings per employee. I’ve always been a proponent of the net income per employee technical and perhaps our little exercise today will give it more credibility within the analysis community.
The Goldman Sachs Group Inc. (GS, Financial) ranked # 23 and is a large cap ($43.18 billion) in the financial sector trading at about $87.70. GS employs 36,800 and has seen a 7% growth in staff. Each Goldman Sachs full-time equivalent contributes $102,174 to the company’s annual net earnings. GS’s price/earnings ratio is 13.34 with a price/earnings growth ratio of 1.77. Return on equity is a modest 7.86%. Price to book is a fractional 0.64. The debt equity ratio is an appalling 687.01 (the result of bailout funds) but the current ratio is a comfortable 1.47.
Morgan Stanley (MS, Financial) is a large cap ($27.29 billion) in the financial sector trading at about $14.16. Each Morgan Stanley full-time equivalent contributes $47,248 to the company’s net annual earnings. MS’s price/earnings ratio is 9.29 with a price/earnings growth ratio of 1.21. Price to book for this investment banking giant is also fractional at 0.45. Return on equity is slightly above GS’s at 8.69%. As a bailout recipient, the debt/equity ratio is in the basement at 592.18 but the current ratio is a solid 1.66.
Goldman Sachs’ employees contribute to the net income of the firm at better than 2 to 1 compared to their counterparts at Morgan Stanley. Maybe happiness is making money or, alternatively, maybe making money is highly rewarded. Either way, Goldman Sachs is the clear winner in this category. As an investment, I’m not so keen on either one.
Cisco Systems Inc. (CSCO, Financial) ranked # 20 and is a large cap ($95.10 billion) in the technology sector trading at about $17.69. CSCO employs 71,825 and has witnessed a 3% increase in personnel. Each Cisco full-time equivalent contributes $88,270 to the company’s annual net earnings. CSCO’s price/earnings ratio of 15.28 is okay but falls a bit short of ideal for the value investor. The price/earnings growth ratio is similarly deficient at 1.19. The price to book is within range at 2.01 and return on equity disappoints at 13.79%. Both the debt/equity and current ratios are exemplary at 35.70 and 3.28 respectively.
Alcatel-Lucent S.A. (ALU, Financial) is a mid cap ($3.15 billion) in the technology sector trading at about $1.39. ALU employs 79,796… Each Alcatel-Lucent full-time equivalent contributes $9,209 to the company’s net annual earnings. The twelve month trailing price/earnings ratio is 4.47 and the fractional price/earnings growth ratio of 0.44 are both attractive fundamentals, as is the price to book of 0.87. Return on equity is a respectable 19.23%. The debt equity ratio of 129.63 disappoints but the current ratio of 1.32 is acceptable.
From an investment standpoint, I’ll subordinate my misgivings in the price/earning and price/earnings growth ratios and select CSCO over ALU. I just can’t abide ALU’s debt/equity ratio and I am impressed by the comparative net income per employee statistics which clearly favor Cisco Systems.
DreamWorks Animation SKG Inc. (DWA, Financial) ranked # 10 and is a small cap ($1.41 billion) in the services sector trading at about $16.82. DWA employs 2,100 and has expanded its staff by 10%. Each Dreamworks full-time equivalent contributes $70,362 to the company’s net annual earnings. . DWA’s price/earnings ratio is 9.68 and the price/earnings growth ratio is 6.92. Price to book is 1.06. Return on equity is reported at 11.84%. The company has no long term debt. As a result, the debt/equity ratio is zero. The current ratio is 3.60.
Regrettably, there is no publicly held company against which DreamWorks can be fairly measured. Worse still, the privately held companies do not provide all the information necessary to make a direct comparison.
The net income per employee statistic seems impressive and happy employeesare productive employees, or so I’m told! Absent a publicly traded company to match-up with we are left to our assumptions, which can be flawed. As an investment, I would have to pass on DWA from the perspective of a value investor.
NetApp Inc. (NTAP, Financial) ranked # 5 and is a large cap ($12.61 billion) in the technology sector and trading at about $35.16. NTAP employs 11,500 and has increased staff by 9%. Each NetApp full-time equivalent contributes $56,704 to the company’s annual net earnings. NetApp’s price/earnings ratio is 21.43 and its price/earnings growth ratio is 0.91. The price to book of 3.32 coupled with the price/earnings ratio takes this one out of value stock territory. Return on equity is unremarkable at 18.60%, however, the debt/equity ratio and current ratio of 30.92 and 2.75 are quite remarkable.
EMC Corporation (EMC, Financial) is a large cap ($44.78 billion) in the technology sector and trading at about $21.95. EMC employs 48,500 full-time equivalents, each contributing $46,598 to the company’s annual net earnings. The price/earnings ratio is almost equal to NetApp at 21.84 and the price/earnings growth ratio is a close match at 0.87. Price to book, however, is significantly better at 2.50. Return on equity falters at 13.15%. The debt equity and current ratios are near perfect at 18.22 and 1.00 respectively but I prefer the NetApp fundamentals in these two areas.
The “best place to work” again turns out to be the place where the employee makes the higher contribution to net income. Is it coincidence that compared to their rival, they seem to be the better investment opportunity as well?
Google Inc. (GOOG, Financial) ranked # 4 and is a large cap ($201.40 billion) in the technology sector and trading at about $621.83. GOOG employs 31,353 and has no figures to report regarding their growth in staff. Each Google full-time equivalent contributes $305,553 to the company’s annual net earnings. Google’s price/earnings ratio is 21.20 and its price/earnings growth ratio is 0.89. Price to book is 3.67. Return on equity is a tolerable 19.52% and debt/equity and current ratios are 13.24 and 5.63 respectively. As other contributors have noted, Google is gagging on cash!
Yahoo! Inc. (YHOO, Financial) is a large cap ($18.13 billion) in the technology sector and trading at about $14.62. YHOO employs 13,600 and each of Yahoo! s full-time equivalents contributes $74,044 to the company’s annual net earnings. Yahoo!’s price/earnings ratio is 17.89 and its price/earnings growth ratio is 1.43. Price to book is a favorable 1.45. Return on equity is a dreary 8.77% which is in stark contrast to a sunny debt/equity ratio of 0.31 and beaming current ratio of 2.83.
Once again, the most attractive company from an investor’s standpoint is also the “best place to work” and the “best place to work” also has the highest level of productivity as expressed in net earnings per employee. I’ve always been a proponent of the net income per employee technical and perhaps our little exercise today will give it more credibility within the analysis community.
