Post on 28-Nov-2014
description
By:Mitch Dietz, Bryan Nuemiller, Aaron Murphy, Kyle Edwards
INDEX
Introduction to Company……………………………………………….
Ratios (02’, 03’, 04’, 05’, 06’)………………………………………………………………
Sales Forecast………………………………………………………………………
Random Walk…………………………………………………………...............
Pro Forma………………………………………………………………………………..
Profits from Economy……………………………………
Analysis w/ Shell…………………………………………..
Who ExxonMobil is…
ExxonMobil is the world’s largest publicly traded international oil and gas company. We
hold an industry-leading inventory of global oil and gas resources. We are the world’s
largest refiner and marketer of petroleum products. And our chemical company ranks
among the world’s largest. But we are also a technology company, applying science and
innovation to find better, safer and cleaner ways to deliver the energy the world needs.
What they do and where….
Meeting the world’s growing energy needs is an enormous challenge. By 2030, as
populations and economies grow, global energy demand will reach close to 325 million
oil-equivalent barrels a day — more than 60% higher than in the year 2000.
Increasingly, developing significant new oil and gas resources requires exploration in
more-remote areas and difficult operating environments. The complexity of these
environments places greater emphasis on financial strength, technological innovation and
execution excellence, areas in which ExxonMobil excels.
An industry leader in almost every aspect of the energy and petrochemical business, we
operate facilities or market products in most of the world’s countries and explore for oil
and natural gas on six continents.
Past 125 years…..
ExxonMobil has evolved from a regional marketer of kerosene in the U.S. to the largest
publicly traded petroleum and petrochemical enterprise in the world. Today we operate in
most of the world's countries and are best known by our familiar brand names: Exxon,
Esso and Mobil. We make the products that drive modern transportation, power cities,
lubricate industry and provide petrochemical building blocks that lead to thousands of
consumer goods. Learn more by using the slider or the arrows below to browse our
history over time.
Ratios for ExxonMobil
2006 Ratios for Return on Investment and for Risk
Return on Assets 18.79%Return on Equity 34.60%Earnings Yield 18.30%Price/Earnings Ratio 5.47Dividend Yield 3.54%Profit Margin 10.46%Operating Margin 36.70%Gross Margin 40.10%
Current Ratio 64%Quick Ratio 0.67Inventory Turnover 22.6Average Days to Sell Inventory 16.2Receivables Turnover 1.39Average Days to Collect Receivables 263.5Debt Ratio 52.73%Debt/Equity Ratio (Total) 1.1Debt/Equity Ratio (Long-Term) 0.866TIE Ratio 212Asset Composition Ratio 15.80%Dividend Payout Ratio 19.30%
Book Value Per Share $9.53 Operating Cycle 279.7Average Cash from Operations 135857Market Price Per Share $36.19 Dividend $1.28 EPS $6.62
2005 Ratios for Return on Investment and for Risk
Return on Assets 17.14%Return on Equity 32.89%Earnings Yield 18.60%Price/Earnings Ratio 5.38%Dividend Yield 3.71%Profit Margin 9.75%Operating Margin 35.90%Gross Margin 38.90%
Current Ratio 63%Quick Ratio 0.72Inventory Turnover 22.6Average Days to Sell Inventory 16.1Receivables Turnover 1.28Average Days to Collect Receivables 285.2Debt Ratio 54.10%Debt/Equity Ratio (Total) 1.18Debt/Equity Ratio (Long-Term) 0.91TIE Ratio 268.2Asset Composition Ratio 16.70%Dividend Payout Ratio 20%
Book Value Per Share $8.11 Operating Cycle 301.3Average Cash from Operations 135857Market Price Per Share $30.70 Dividend $1.14 EPS $5.71
2004 Ratios for Return On Investment and for Risk
ROA 12.34%ROE 23.92%Earnings Yield 8.97%Price/Earnings Ratio 11.15 timesDividend Yield 3.24%Profit Margin 9.07%Operating Margin 35.98%Gross Margin .5867
Current Ratio 1.1973Quick Ratio .96397Inventory Turnover 12.02Average Days toSell inventory 30.37Receivables Turnover 1.24%Average Days toCollect Inventory 294.35Debt Ratio .4941Debt/Equity (total) .93825Debt/Equity (long term) .88499TIE Ratio 154.43Asset Composition Ratio 12.23%Dividend PayoutRatio 18.7%
Book Value/Share $13.69Operation Cycle 273.9Average Cash from Operations $28,498Market Price/Share $41.00Dividend $0.98EPS $3.24
2003 Ratios for Return On Investment and for Risk
ROA 12.34%ROE 23.92%Earnings Yield 8.97%Price/Earnings Ratio 11.15 timesDividend Yield 3.24%Profit Margin 9.07%Operating Margin 35.98%Gross Margin .5867
Current Ratio 1.1973Quick Ratio .96397Inventory Turnover 12.02Average Days toSell inventory 30.37Receivables Turnover 1.24%Average Days toCollect Inventory 294.35Debt Ratio .4941Debt/Equity (total) .93825Debt/Equity (long term) .88499TIE Ratio 154.43Asset Composition Ratio 12.23%
Dividend PayoutRatio 18.7%
Book Value/Share $13.69Operation Cycle 273.9Average Cash from Operations $28,498Market Price/Share $41.00Dividend $0.98EPS $3.24
2002 Ratios for Return on Investment and for Risk
Return on Assets 7.51%Return on Equity 15.36%Earnings Yield 4.48%Price/Earnings Ratio 22.57Dividend YieldProfit Margin 5.70%Operating MarginGross Margin 5.48%
Current Ratio 115%Quick Ratio 0.95Inventory Turnover 27.39Average Days to Sell Inventory 13.33Receivables TurnoverAverage Days to Collect ReceivablesDebt Ratio 51.13%Debt/Equity Ratio (Total) 1.05Debt/Equity Ratio (Long-Term) 0.99TIE Ratio 43.99
Asset Composition RatioDividend Payout Ratio
Book Value Per Share $11.13
Average Cash from OperationsMarket Price Per Share $37.70 Dividend $0.92 EPS $1.69
Sales Forecast
Year Sales2001 2087152002 2009492003 2370542004 2912522005 2589552006 365467 -2007 304239.9 +
2008 365467 +
Sales for 2009
426694.1259
2009 426694.1 +
Sales for 2010
487921.2519
2010 487921.3STD. DEV.
61227.13
Sales forecasting is especially difficult when you don’t have any previous sales history to
guide you, as is the case when you’re working on preparing cash flow projections as part
of writing a business plan. Here, Terry Elliott provides a detailed explanation of how to
do sales forecasting. –Ed.There is all sorts of ways to estimate sales revenues for the
purposes of sales forecasting. One point to remember when sales forecasting is that if you
plan to work with a bank for financing, you will want to do multiple estimates so as to
have more confidence in the sales forecast. How do you do this?
Sales Forecasting Method #1
For your type of business, what is the average sales volume per square foot for similar
stores in similar locations and similar size? This isn't the final answer for adequate sales
forecasting, since a new business won't hit that target for perhaps a year.
Sales Forecasting Method #2
For your specific location, how many households needing your goods live within say, one
mile? How much will they spend on these items annually, and what percentage of their
spending will you get, compared to competitors? Do the same for within five miles (with
lower sales forecast figures). (Use distances that make sense for your location.)
Sales Forecasting Method #3
If you offer say, three types of goods plus two types of extra cost services, estimate sales
revenues for each of the five product/service lines. Make an estimate of where you think
you'll be in six months (such as "we should be selling five of these items a day, plus three
of these, plus two of these.") and calculate the gross sales per day. Then multiply by 30
for the month. Now scale proportionately from month one to month six; that is, build up
from no sales (or few sales) to your six month sales level. Now carry it out from months
six through 12 for a complete annual sales forecast.
Don’t Just Do One Sales Forecast
Instead of forecasting annual sales as a single figure, use one or two of the sales
forecasting methods above and generate three figures: pessimistic, optimistic, and
realistic. Then put the figures in by month, as depending on your business, there could be
HUGE variations by month. (Some retail firms do 50 percent of their gross sales around
Christmas, from the end of October to the end of December, for example, yet barely get
by June through August.)
Include Expenses in Your Sales Forecasting
Now put in your expenses by month, including big purchases by season (or however you
buy materials/goods). Remember, you may buy materials or inventory in say, July, for
Christmas, yet not get all of your receipts until 45 days after Christmas. There can be big
cash flow implications. Also, will you be buying vehicles? Capital equipment? Make sure
to show depreciation expense. In your expenses, put in an allowance for bad debts. Figure
how much of your sales are by cash, how much by credit card, how much by your
extending credit. Deduct say four percent or more for credit card expense for that portion
sold by credit card. For payroll expenses, put in estimated tax withholding payments
quarterly that must be paid to the government. If you're going to a bank for financing, be
able to answer questions such as, have you made an allowance for a reserve cash account,
for your slow months, but also in case you have to quickly replace a vehicle or
equipment? You say you'll charge x dollars for your product, but what happens when
your competition cuts the price by 33 percent and still makes a profit? How specifically
will you grow your business-- selling more to existing customers, selling existing
products to new customers, selling new products to existing customers, and selling new
products in order to attract new customers? They're going to want to see if you've got a
real plan. Remember that it is acceptable (and realistic) to have a negative cash flow
projection for the early months of your cash flow projection period.
Random Walk
Closing Prices Coin Flip
Plus/Minus
81.44 + 83.99481.89 + 86.54981.71 - 83.99483.22 + 86.54984.38 + 89.10385.49 - 86.54985.55 - 83.99485.37 + 86.54987.01 - 83.99488.1 + 86.54986.92 + 89.10387.17 + 91.65889.13 + 94.21289.89 - 91.658
89.39 + 94.21289.38 + 96.76787.01 - 94.21287.75 + 96.76786.69 + 99.32187.19 - 96.76784.51 + 99.321
Std. Dev2.554440
48
The random walk hypothesis is a financial theory stating that stock market prices
evolve according to a random walk and thus the prices of the stock market cannot be
predicted. It has been described as 'jibing' with the efficient market hypothesis. Investors,
economists, and other financial behaviorists have historically accepted the random walk
hypothesis. They have run several tests and continue to believe that stock prices are
completely random because of the efficiency of the market. The term was popularized by
the 1973 book, A Random Walk Down Wall Street, by Burton Malkiel, currently a
Professor of Economics and Finance at Princeton University.
Burton G. Malkiel, an economist professor at Princeton University and writer of A
Random Walk down Wall Street, performed a test where his students were given a
hypothetical stock that was initially worth fifty dollars. The closing stock price for each
day was determined by a coin flip. If the result was heads, the price would close a half
point higher, but if the result was tails, it would close a half point lower. Thus, each time,
the price had a fifty-fifty chance of closing higher or lower than the previous day. Cycles
or trends were determined from the tests. Malkiel then took the results in a chart and
graph form to a chartist, a person who “seeks to predict future movements by seeking to
interpret past patterns on the assumption that ‘history tends to repeat itself’”.[2] The
chartist told Malkiel that they needed to immediately buy the stock. When Malkiel told
him it was based purely on flipping a coin, the chartist was very unhappy. This indicates
that the market and stocks could be just as random as flipping a coin.
The random walk hypothesis was also applied to NBA basketball. Psychologists
made a detailed study of every shot the Philadelphia 76ers made over one and one-half
seasons of basketball. The psychologists found no positive correlation between the
previous shots and the outcomes of the shots afterwards. Economists and believers in the
random walk hypothesis apply this to the stock market. The actual lack of correlation of
past and present can be easily seen. If a stock goes up one day, no stock market
participant can accurately predict that it will raise again the next. Just as a basketball
player with the “hot hand” can miss his or her next shot, the stock that seems to be on the
rise can fall at any time, making it completely random.
There are other economists, professors, and investors who believe that the market
is predictable to some degree. The people believe that there are trends and incremental
changes in the prices and when looking at them, one can determine whether the stock is
on the rise or fall. There have been key studies done by economists and a book has been
written by two professors of economics that try to prove the random walk hypothesis
wrong.
Martin Weber, a leading researcher in behavioral finance, has done many tests
and studies on finding trends in the stock market. In one of his key studies, he observed
the stock market for ten years. Over those ten years, he looked at the market prices and
looked for any kind of trends. He found that stocks with high price increases in the first
five years tended to become under-performers in the following five years. Weber and
other believers in the non-random walk hypothesis cite this as a key contributor and
contradictor to the random walk hypothesis.[3]Another test that Weber ran that contradicts
the random walk hypothesis was finding stocks that have had an upward revision for
earnings outperform other stocks in the forthcoming six months. With this knowledge,
investors can have an edge in predicting what stocks to pull out of the market and which
stocks — the stocks with the upward revision — to leave in. Martin Weber’s studies
detract from the random walk hypothesis, because according to Weber there are trends
and other tips to predicting the stock market. Professors Andrew W. Lo and Archie Craig
MacKinlay, professors of Finance at the MIT Sloan School of Management and the
University of Pennsylvania, respectively, have also tried to prove the random walk theory
wrong. They wrote the book A Non-Random Walk down Wall Street, which goes
through a number of tests and studies that try to prove there are trends in the stock market
and that they are somewhat predictable. They prove it with what is called the simple
volatility-based specification test, which is an equation that states:
Where
Xt is the price of the stock at time t
μ is an arbitrary drift parameter
εt is a random disturbance term.
With this equation, they have been able to put in stock prices over the last number of
years, and figure out the trends that have unfolded.[4] They have found small incremental
changes in the stocks throughout the years. Through these changes, Lo and MacKinlay
believe that the stock market is predictable, thus contradicting the random walk
hypothesis.
ExxonMobil
Pro FormaYear 2005 Actual 2006
Net Sales 358,955Growth Rate in Net Sales 14%Cost of Goods Sold/Net Sales 12%Gen…Sell…and Admin/Net Sales 4%Long-term Debt 6645Current Portion long-term debt 1702Interest Rate 0.18%Tax rate 7.77%Dividend 19.31%Current Assets/Net Sales 21.11%Net fixed assets 105328Current Liab./Net Sales 14%Owner's Equity 113844
Income Statement
Forecast 2006 Forecast 2007
Net Sales 409208.7
Cost of Goods Sold 49933.14Gross Profit 359275.56Gen…sell…admin...exp 16271.22Interest Exp -532.7598
Earnings before Tax343537.099
8
Tax26703.5482
4
Earnings after Tax316833.551
6Dividends Paid 61083.51
Add. To retained earnings255750.041
6
Balance SheetCurrent Assets 86385.78Net Fixed Assets 105328Total Assets 191713.78
Current Liab. 55651.38Long-term Debt 6645
Equity369594.041
6
Total Liab. And Equity 431890.421
6
External Funding Req. -300758.00Pro forma describes a presentation of data, typically financial statements, where the data
reflect the world on an 'as if' basis. That is, as if the state of the world was different from
that which is in fact the case. For example, a pro forma balance sheet might show the
balance sheet as if a debt issue under consideration had already been issued. A pro forma
income statement might report the transactions of a group on the basis that a subsidiary
acquired partway through the reporting period had been a part of the group for the whole
period. This latter approach is often adopted in order to ensure comparability between
financial statements of the year of acquisition with those of subsequent years.
A pro forma document is provided in advance of an actual transaction. Such a
document serves as a model for the actual documents of the transaction. For example,
when a new corporation is envisioned, its founders may prepare a business plan
containing pro forma financial statements, such as projected cash flows and income
statements. In addition, pro forma operating figures or profit and/or loss figures may be
preferred or even demanded by investors when the actual figures are known to be
inaccurate because of sloppy or suspected falsified business accounting practices. Pro
forma figures should be clearly labeled as such and the reason for any deviation from
reported past figures clearly explained.
In trade transactions, a pro forma (or proforma) invoice is a document that states
a commitment from the seller to sell goods to the buyer at specified prices and terms. It is
used to declare the value of the trade. It is not a true invoice, because it is not used to
record accounts receivable for the seller and accounts payable for the buyer.
Profits from Economy
BP Amoco enjoyed a profit increase of 117% between 2002 and 2004. In 2002, BP
Amoco netted a hefty 8.4 billion. In 2004, this went to 17 billion. Shell raked in a
massive 10 billion dollar profit in 2002 which ballooned to 18 billion by 2004. Not to be
outdone is Exxon Mobil. In 2002, Exxon Mobil’s profit was 11.5 billion and by 2004,
they were taking the public for 25 billion. By any measure, Exxon Mobil’s performance
last year was a blowout. The company reported Friday that it beat its own record for the
highest profits ever recorded by any company, with net income rising 3 percent to $40.6
billion, thanks to surging oil prices. The company’s sales, more than $404 billion,
exceeded the gross domestic product of 120 countries. Exxon Mobil earned more than
$1,287 of profit for every second of 2007. The company also had its most profitable
quarter ever. It said net income rose 14 percent, to $11.7 billion, or $2.13 a share, in the
last three months of the year. The company handily beat analysts’ expectations of $1.95 a
share, after missing targets in the last two quarters.
While gas prices continue to rise, people still don’t take action! Profits from these high
gas prices are outrageous. ExxonMobil has seen this firsthand. Their profits have nearly
tripled since 2002. Fuel prices are impacted by a number of factors, including changes in
the price of crude oil, supply and demand, fuel specifications, government regulations,
taxes, and transportation costs. Actual or perceived changes in these fundamentals, such
as those caused by geopolitical uncertainty or market speculation, can have an impact on
commodity markets. Therefore, it's important to recognize that a number of factors may
combine to impact transportation fuel prices at any given time.
ExxonMobil Position
Gasoline prices are influenced by a highly competitive retail marketplace and many other
factors, including global commercial trading markets for crude oil and refined petroleum
products. Our focus at ExxonMobil is to continually take steps to improve our ability to
compete through a selective investment program, ongoing efforts to reduce costs, and a
strong commitment to operational excellence.
Prices for crude products are set by worldwide markets comprised of buyers and sellers
reacting to their individual needs as well as perceptions of supply and demand. Policies
and initiatives need to be advanced that support the underlying economic fundamentals
that lead to a balanced marketplace. In the U.S., this includes support for increased
domestic crude production, and focused efforts to reduce the complexities and limitations
that are creeping into the refinery and logistics systems due to the proliferation of
specialty fuels.
This is from an article by: Beth Boerger
“With gas prices headed towards the stratosphere, whining about the oil industries
stuffing their pockets with our money and pointing our fingers toward the ever-present
scapegoat that is Washington won’t likely result in gas prices going down anytime soon.
If the price of gas is to re-enter Earth’s atmosphere in the near future, we need to stop
daydreaming and take action. For one thing, this country’s ridiculous obsession with
over-the-top, impractical SUVs need to stop. A vehicle big enough to go charging
through the jungle is not anything someone needs for any reason.
By driving these vehicles with poor gas mileage, some Americans can put some of the
blame of high prices on themselves. They waste gas and keep demand high, thus leaving
people with cars, such as myself, to keep contributing to Big Oil’s piggy bank.
With all that is going on with the “go green” initiatives, and everybody jumping on the
“save the planet” bandwagon these days, why don’t more people put their money where
their mouths are?”
Royal Dutch Shell
Royal Dutch Shell, commonly known simply as Shell, is a multinational oil company of
British and Dutch origins. It is one of the largest private sector energy corporations in the
world, and one of the six "super majors" (vertically integrated private sector oil
exploration, natural gas, and petroleum product marketing companies). The company's
headquarters are in The Hague, Netherlands, with its registered office in London, United
Kingdom (Shell Centre).[1]
The company's main business is the exploration for and the production,
processing, transportation and marketing of hydrocarbons (oil and gas). Shell also has a
significant petrochemicals business (Shell Chemicals), and an embryonic renewable
energy sector developing wind, hydrogen and solar power opportunities. Shell is
incorporated in the UK with its corporate headquarters in The Hague, its tax residence is
in Netherlands, and its primary listings on the London Stock Exchange and Euronext
Amsterdam (only "A" shares are part of the AEX index).
Shell's revenues of $318.8 billion in 2006 made it the third-largest corporation in
the world by revenues behind only ExxonMobil and Wal-Mart. Its 2006 gross profits of
$26 billion made it the world's second most profitable company, after ExxonMobil and
before BP. Forbes Global 2000 in 2007 ranked Shell the eighth largest company in the
world. Also n 2007, Fortune magazine ranked Shell as the third-largest corporation in the
world, behind Wal-Mart and ExxonMobil. Shell operates in over 140 countries. In the
United States, its Shell Oil Company subsidiary, headquartered in Houston, Texas, is one
of Shell's largest businesses.
Ratios (Royal Dutch Shell)
2006 Ratios for Return On Investment and for Risk
Current 1.19
Acid 1.76
Working Capital $ 114,945.00
Net Profit Margin $ 55,856.00
ROA 11.1%
ROE 22.0%
Interest Coverage 37.84%
Cash Flow to Long Term Debt 2.00
Long Term Debt to Equity 1.04
EBITDA $ 55,856.00
Dividend Yield 3.6%
Dividend Payout 0.32
P/E 13.52%
Price to Cash Flow 9.51%
Cash Flow Per Share 7.47
Price to Book 3.99%
Production to Reserve 8.41%
Reserve Life Index 11.89
2005 Ratios for Return On Investment and for Risk
Current 1.15
Acid 0.91
Working Capital $ 97,918.00
Net Profit Margin $ 54,109.00
ROA 11.9%
ROE 26.8%
Interest Coverage 40.72%
Cash Flow to Long Term Debt 2.33
Long Term Debt to Equity 1.24
EBITDA $ 54,109.00
Dividend Yield 5.1%
Dividend Payout 0.41
P/E 17.02%
Price to Cash Flow 10.39%
Cash Flow Per Share 6.2
Price to Book 4.41%
Production to Reserve 9.39%
Reserve Life Index 10.64
2004 Ratios for Return On Investment and for Risk
Current 1.13
Acid 0.85
Working Capital $ 91,383.00
Net Profit Margin $ 43,127.00
ROA 10.2%
ROE 19.6%
Interest Coverage 28.89%
Cash Flow to Long Term Debt 1.82
Long Term Debt to Equity 1.05
EBITDA $ 43,127.00
Dividend Yield 3.9%
Dividend Payout 0.39
P/E 21.76%
Price to Cash Flow 9.80%
Cash Flow Per Share 6.07
Price to Book 4.51%
Production to Reserve 9.83%
Reserve Life Index 10.17
2003 Ratios for Return On Investment and for Risk
Current 0.89
Acid 0.63
Working Capital $ 105,733.00
Net Profit Margin $ 33,215.00
ROA 7.8%
ROE 15.8%
Interest Coverage 15.42%
Cash Flow to Long Term Debt 2.41
Long Term Debt to Equity 0.81
EBITDA $ 33,215.00
Dividend Yield 3.9%
Dividend Payout 0.55
P/E 29.02%
Price to Cash Flow 10.70%
Cash Flow Per Share 4.9
Price to Book
Production to Reserve
Reserve Life Index
2002 Ratios for Return On Investment and for Risk
Current 0.84
Acid 0.61
Working Capital $ 90,858.00
Net Profit Margin $ 25,795.00
ROA 6.6%
ROE 14.5%
Interest Coverage 12.41%
Cash Flow to Long Term Debt 2.31
Long Term Debt to Equity 0.94
EBITDA $ 27,795.00
Dividend Yield 3.8%
Dividend Payout 0.59
P/E 32.02%
Price to Cash Flow 13.88%
Cash Flow Per Share 3.25
Price to Book
Production to Reserve
Reserve Life Index
Comparison between ExxonMobil and Shell
Royal Dutch Shell
The ROE for Shell has somewhat of a pattern. From 2002-2005 it steadily increases. But
in 2006 it went from 26.8% to 22.0%. ROE measures the rate of return on the ownership
interest (shareholders' equity) of the common stock owners. ROE is viewed as one of the
most important financial ratios. It measures a firm's efficiency at generating profits from
every dollar of net assets (assets minus liabilities), and shows how well a company uses
investment dollars to generate earnings growth. ROE is equal to a fiscal year's net income
(after preferred stock dividends but before common stock dividends) divided by total
equity (excluding preferred shares), expressed as a percentage. But not all high-ROE
companies make good investments. Some industries have high ROE because they require
no assets, such as consulting firms. Other industries require large infrastructure builds
before they generate a penny of profit, such as oil refiners. You cannot conclude that
consulting firms are better investments than refiners just because of their ROE.
Generally, capital-intensive businesses have high barriers to entry, which limit
competition. But high-ROE firms with small asset bases have lower barriers to entry.
Thus, such firms face more business risk because competitors can replicate their success
without having to obtain much outside funding. As with many financial ratios, ROE is
best used to compare companies in the same industry.
The P/E ratio is decreasing throughout the years. It starts out at 32.02% in 2002
and ends at 13.52% in 2006. The P/E ratio is a measure of the price paid for a share
relative to the annual income or profit earned by the firm per share. A higher P/E ratio
means that investors are paying more for each unit of income. It is a valuation ratio
included in other financial ratios. The reciprocal of the P/E ratio is known as the earnings
yield. By comparing price and earnings per share for a company, one can analyze the
market's stock valuation of a company and its shares relative to the income the company
is actually generating. Investors can use the P/E ratio to compare the value of stocks: if
one stock has a P/E twice that of another stock, all things being equal (especially the
earnings growth rate), it is a less attractive investment. Companies are rarely equal,
however, and comparisons between industries, companies, and time periods may be
misleading.
\References
Shell International B.V. (2007-03-28). "Royal Dutch Shell plc updates on Chief Executive". Press release. Retrieved on 2007-08-30.
ExxonMobil's Form 10-K. SEC. Retrieved on 2008-04-21.
ExxonMobil stock information. MarketWatch.com. Retrieved on 2008-02-28.
http://www.exxonmobil.com/corporate/
http://www.shell.com/
Exxon Mobil Profit Sets Record Again: Top of Form bottom of FormBy JAD MOUAWAD Published: February 1, 2008 http://www.nytimes.com/2008/02/01/business/01cnd-exxon.html?em&ex=1202101200&en=575e77c5fd8688b0&ei=5087%0A