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So why is Samsung, who makes similar kind of revenue not up there with $1T market valuation? Walmart makes double that revenue.
by harpratap 6y ago
So why is Samsung, who makes similar kind of revenue not up there with $1T market valuation? Walmart makes double that revenue.
- jeffshek 6y agoBecause their "expected" future profit margins are significantly lower than Apple's. Caveat: "Expected" does not mean fact. But it is understandable why investors believe this.
- harpratap 6y ago> Caveat: "Expected" does not mean fact. But it is understandable why investors believe this. Yes, this is what I said. Stock markets factor in future potential (a little too much I think) and not just current performance. Hence their growing diversion from reality.
- valuearb 6y agoExcept that Apples current performance demolishes Samsung, Apple is and has been far more profitable. Apple has never been highly valued either, it spent most of the last decade well below the markets average price to earnings ratio, the market was continually saying it didn’t think Apples earnings could grow, or even last. It hasn’t been till the last year where Apple finally broke the market average and squeezed into a low 20 PE ratio. Fir comparison, Amazon hasn’t been below 60 in forever.
- harpratap 6y agoI don't see how? Samsung made $45B profit in 2017 vs $48B in 2017 for Apple. 2018- $49B Samsung vs $60B Apple. Even in worst cases Apple made 2x the profits as Samsung. Which means they should at least be worth half as much as Apple by your logic? But they are 5 times less than Apple right now in market cap.
- asplake 6y agoApple is seen as the one to sustain those profits. The models for Samsung either see lower profits or discount them more steeply in their risk adjustments.
- valuearb 6y agoSamsung has much lower quality profits. They have lower margins, and have much higher capital reinvestment requirements please, ie are forced to reinvest more of their profit back into their manufacturing plants. Essentially their profits are overstated.
- fauigerzigerk 6y agoSamsung's net income would only be overstated if their capital spending was unsustainably low. I don't know if that is actually the case.
- valuearb 6y agoOr if they were run by a felon in a country where accounting and governmental employees are highly motivated not to criticize said felons accounting practices. Then you might think twice about taking them at face value.
- outside1234 6y agoStocks are valued by their earnings largely. A stock’s price is theoretically the current value of a long term stream of income adjusted by the risk factor around its growth (positive or negative). Revenue is interesting but only to the extent that it indicates earnings. This is because any two people can create two companies with a billion dollars in revenue but it is much more difficult to build one with a billion in earnings.
- dmode 6y agoValuation has only a fleeting relationship with revenue. In the traditional sense valuation is essentially the cash returned to shareholders discounted over time. Walmart’s margins are thin. That’s why their valuation is much lower