After writing an article about the World's 10 Most Admired Companies surveyed by Fortune and CNN Money, we decided to write a followup, analyzing the following 10 with our thoughts on their market-beating potential:
International Business Machines Corp. (IBM): Although Watson’s victory on Jeopardy was considered as a checkmate by the majority, IBM has a different point of view: The company recently posted its biggest quarterly profit rise over the last 10 years. IBM, the titan of innovation, disburses billions of dollars into research&development every year. IBM has a market cap of $199.94 billion, and a P/E ratio of 14.17, while its forward P/E ratio is 11.4. IBM had an EPS growth of 18.59% during the last five years. Net profit margin in 2010 was 14.85%, offering a dividend yield of 1.60%. If the analyst estimates of 10% growth hold, IBM can beat the market over long run.
General Electric Co. (GE): Even though General Electric got a beating during the financial crisis, now it’s doubling down on its major business – making everything from lightbulbs to fuel cells. The market cap of GE is $214.3 billion, and P/E ratio is 17.5, while forward P/E ratio is 12.5. GE had an EPS growth of -6.74% over the last five years, but the company is expected to have at least 10% EPS growth in long run. Net profit margin in 2010 was 7.6%, while the company offered a dividend yield of 2.78%. Even if the analyst estimates do not hold GE has enough cash to pay dividends. Since January, insiders are buying large chunks of stocks.
Walt Disney Co. (DIS): Definitely needs to be admired very much, if its market-beating movies are taken into consideration, who cleared a 20% profit increase last year. DIS has a market cap of $79.55 billion, and a P/E ratio of 18.5, while forward P/E ratio is 13.8. Walt Disney had an EPS growth of 11.37% during the last five years. Net profit margin in the last year was 11.3%.
3M Co. (MMM): Who can forget the Post-it Notes and Scotch Tape? 3M maintains a quite impressive portfolio in six segments. The market capital of MMM is $66.77 billion, and P/E ratio is 16.66, while forward P/E ratio is 13.5. The company had an EPS growth of 6.95% over the last five years. With a net profit margin of 15.3%, 3M Co. had a dividend yield of 2.4% last year.
Starbucks Corp. (SBUX): The coffee-giant periodically improves itself to please customers, as its sales have been setting records so far. Starbucks operates about 16.858 stores, offering a number of 30 blends, and single-origin premium arabica coffees. SBUX has a market capitalization of $26.48 billion and a P/E ratio of 25.91, while forward P/E ratio is 19.61. The company had a 15.34% of 5-year EPS growth during the last five years. Net profit margin in 2010 was 9.6%, while SBUX offered a dividend yield of 1.4%.
Johnson & Johnson (JNJ): JNJ researches, develops, manufactures and sells a variety of products in the health care sector. CEO William C. Weldon said in a recent earnings report: "Although 2010 was a challenging year, the business continued to deliver earnings growth, while investing in the future and emerging a stronger organization." The market cap of JNJ is $164 billion. Its P/E ratio is 12.52, while forward P/E is 11.6. JNJ had an annualized EPS growth of 7.35% over the last five years. With a net profit margin of 21.65% and a dividend yield of 3.61%, JNJ is more profitable than MMM. JNJ has market beating potential, however uncertainties in the healthcare policy is a big threat.
American Express Co. (AXP): Providing charge and credit payment services worldwide, AmEx is the third-largest card issuer in the U.S.A. The company offers various products and services like expense management products and services, credit card products and stored value products as well. Market cap of AXP is $55.77 billion, and P/E ratio is 13.84, while forward P/E is 11.34. AmEx had an EPS growth of 6.61% over the last five years. 2010’s dividend was 1.6%, and the company had a net profit margin of 14.6%. Unlike other financial companies, AmEx has a very conservative balance sheet with reasonable goodwill and intangible estimates.
Nordstrom Inc. (JWN): Nordstrom is a fashion specialty retailer offering shoes, apparel, accessories and cosmetics for everyone in the U.S., having 187 stores in 28 states as of March, 2010. JWN has a market capitalization of $10.02 billion and a P/E ratio of 16.7. The forward P/E ratio is 13.4. Nordstrom had an EPS growth of 11.57% during the last five years. The net profit margin in 2010 was 6.32%, and the company offered a dividend yield of 2% over the same period.
Target Corp. (TGT): Operating as a general merchandise and food discount stores in the U.S., TGT offers apparel and accessories, home furnishings and decor, household essentials and hardlines like music, toys, electronics and computer software. The market capital of TGT is $31.14 billion and the P/E ratio is 12.3 while the forward P/E ratio is 10.53. Target Corp. had an annual EPS growth of 8.13% past five years. With a net profit margin of 4.33%, the company offered a dividend yield of 2%. While there is always risk of getting out of business given the thin margins, Target was able to differentiate itself against its biggest competitor: Walmart.
JP Morgan Chase & Co. (JPM): JPM provides a variety of financial services over the world, offering service with six segments. JPM has a market cap of about $186,67 billion, and a P/E ratio of 11.8, while forward P/E ratio is 8.38. JP Morgan had an EPS growth of 11.34% during the last five years. Net profit margin in 2010 was 16.91% and last year’s dividend was 2.13%. While JPM extremely inflated its goodwill and intangibles, it has market beating potential given its profitability.