Quick lesson in stocks before I hit you with the numbers – you ready? So a company goes public, a decision is made as to how many shares to chop the company into for both the public and insiders to trade with one another. As with anything else, when the demand for something for which there is a finite supply goes up or down, so does the price. But there are only two figures I want to go into now, a company’s market cap (the number of outstanding shares multiplied by the price of the last trade yielding the net worth of a company) and a company’s price to earnings ratio, or the company’s market cap divided by its annual net income.
Wait, who am I kidding, I’m not good enough at understanding this myself let alone attempt to teach you all and by now if you’ve read this far you probably already know this stuff and wanted a good laugh at me fumbling to explain the numbers, or maybe you want the numbers too. So I’ll just give you the latest numbers, updated to the point at which you clicked into this article courtesy of the combined powers of Google Docs and Google Finance. In other words I’m just showing off a little Google trick. Check if you don’t believe me, these are fresh digits.
[gdocs st_id=0AoIeG9EbSI_NdFZmYmtudFcySVNfVjd4aHd1R3RtX1E wt_id=od6 type=’spreadsheet’]
At the time of my writing this (and the data you’re looking at may have since changed as again, it’s live baby, sort of), Apple has plowed further ahead of Microsoft in its market cap which, though pretty much mostly symbolic, is damn impressive. Not too many people saw that coming. Now Apple makes about a third less money than Microsoft yet Wall Street values them 12% more than Microsoft which means the smart money’s on Apple to grow faster, innovating and making more cash money, than Microsoft, and by a lot, a discrepancy amplified further by the fact that Microsoft pays dividends, making their shares more attractive, and Apple doesn’t.
Wall Street values Google less than both those two heavyweights however, based on their current respective price to earnings ratios, Wall Street is more optimistic on Google’s future growth than on Microsoft’s or Apple’s which, as a shareholder of Google (actually I own a little of all three but I’m rooting for Google), is flattering.
But not as flattering as Verizon whose price to earnings (again, at the time of my writing this) is almost 120. That’s huge. Compare that to AT&T at 12. Seems investors have much greater confidence that Verizon’s creepin’ while AT&T’s sleepin’. Since I associate Verizon more with Google than I do AT&T, that pleases me.
Lastly, RIM, the Blackberry guys, in terms of P/E it is the biggest dog of the six, or as others would see it, the “cheapest” of the stocks I listed, for which there is marginal optimism in growth mixed with some trepidation in loss which I tried to capitalize upon by betting against them a month ago (shorting), but it turned out I couldn’t do that on a retirement account. Some companies don’t have a P/E because they lose money, like Sprint, and no one’s figured out how to divide by zero yet.
Tl;dr? Here are six companies we talk about in a cool Google spreadsheet, here’s a column called P/E, which represents, sort of, the Vegas odds on the company, the greater the number meaning the greater the Vegas optimism of the company’s general expansion (mainly in revenue) over time but some other stuff too – and hey, neat Google trick.