Rating: 7Reasoning: After looking at Exxon’s financials and their expense controls they are looking pretty good. When it comes to the expenses they have had a steady decrease in the past three years, which has had a positive outlook on their operating margin. Their current operating margin is 11%, which as a whole two points higher than the industry average, which is 9% (XOM Competitors).
This shows that as a company as a whole they are proving to be more profitable than their industry as a whole. Having lower operating expenses as a company allows you to become more profitable. Exxon has been able to put in place some controls for being able to maintain their expenses in order to stay profitable. Major operational efficiencies for Exxon include their ability to manage their expenses and control costs (Learn about ExxonMobil’s business risks).
A major area in which Exxon needs to control costs is being able to avoid spills. They are able to limit their spills through ongoing upgrades, improvements in technology and inspections. These expense controls play a big role in Exxon’s ability to keep their operating expenses low and even decreasing. Exxon is labeled as a 7 because they do show some good ways in which they have been able to implement expense controls and have been able to lower their operating expenses over the past three years.
MONRating: 9Reasoning: Monsanto’s financials and their expense controls are looking very good. Their current operating margin is 26% which is very high and showing great profitability for the company (MON Competitors). This number is very good compared to their industry as a whole which has an industry average of only 10%. When looking also at their operating expenses for the last three years they have been able to stay pretty consistent as of the past three years. Being able to keep your expenses consistent from year to year is a great way for a company to project your profitability.
In order to control expenses MON is able to use a hedging strategy for short-term changes in commodity pricing (Monsanto 10k form). This allows them to provide insurance against themselves in case a negative event occurs. This is a great way for a company to make sure that they are protected against any unforeseen expenses in the future. Monsanto is labeled as a 9 because they have the highest operating margin as compared to their industry average and they have the greatest controls for their expenses.
BARating:4Reasoning: When it comes to Boeing’s financials and their expense controls they have not looked very good in the recent past. Looking into the expenses of the past three years they have showed a consistent increases which has lead to a operating margin of 7% (BA Competitors). This compared to an 11% operating margin for the industry shows that they are less profitable than their industry as a whole currently.
Even thought they do have some controls in place to try and keep their operating expenses down it is hard for this industry because of what they do. Boeing has in place an effort to decrease the cost to build some of their aircrafts by reorganizing its plants for greater efficiency and renegotiating contracts with their suppliers and labor unions (The Boeing Company 2013 Annual Report).
The better implementation of these expense controls will be able to better benefit them in the future. Boeing is labeled a 4, the lowest out of all the companies because they have shown an increase in expenses over the last three years which the other companies have not as well as not having the best controls in place for their company to improve this in the future.
WMTRating: 8Reasoning: Wal-Mart’s financials tell a very interesting story. WMT has an operating margin that is greater than the industry average by only on point. The operating margin for Wal-Mart is at 6% while the industry average is at 5% (WMT Competitors). This shows that they are only a little bit more profitable than their industry as a whole. When looking into their operating expenses it shows that they have been able to keep them fairly consistent over the last four years.
The ability to keep them consistent has to do with their great controls the company has in place. Wal-Mart has been a major player for so long that they have been able to manage in ways that have kept them profitable. Being able to find the lowest prices from their suppliers has been a great way they have been able to achieve this (WMT 10-k). Wal-Mart is labeled as an 8 because they have been able to control expenses in a very positive way for some time now and have been able to be great at it.
ConclusionWe looked as these companies in comparison to Exxon and determined which would be good to invest in and for what reason. Deciding on which of these companies to invest in is still difficult but the analysis of these five specific areas will help to influence the decision. Looking into the “Big potential market” aspect of things the best company to invest in would be Monsanto. Monsanto is a part of the growing agriculture industry, which makes them the best for this criteria. Also, looking into the expense tracking and controls aspect Monsanto is also the leader. Monsanto uses hedging as a big part of their controls and being able to avoid/ deal with unforeseen expenses that come along for one reason or another. The next criteria we analyzed was Access to Capital.
We determined that Boeing had the largest access to capital because they have highest cash balance currently along with the best current ratio of all the companies. Dependence on key individuals was another criteria we examined and we see Exxon and Wal-Mart as the leaders in this category. The final category we looked at was exclusivity. The leader in this aspect is Monsanto. They have the most exclusive industry in being part of the agriculture industry and this industry has the largest barrier to entry. By analyzing all of these industries in all of these different criteria it looks like the most positive future for investors would have to be Monsanto in comparison to Exxon because they are leading in three of these five categories.
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BA Competitors | Boeing Company (The) Common Sto Stock – Yahoo! Finance. [online] Available at: https://finance.yahoo.com/q/co?s=BA+Competitors [Accessed 28 Sep. 2014]. Finance.yahoo.com, (2014). MON Competitors | Monsanto Company Common Stock Stock – Yahoo! Finance. [online] Available at: http://finance.yahoo.com/q/co?s=MON+Competitors [Accessed 28 Sep. 2014].
Finance.yahoo.com, (2014). WMT Competitors | Wal-Mart Stores, Inc. Common St Stock – Yahoo! Finance. [online] Available at: https://finance.yahoo.com/q/co?s=WMT+Competitors [Accessed 28 Sep. 2014]. Finance.yahoo.com, (2014). XOM Competitors | Exxon Mobil Corporation Common Stock – Yahoo! Finance. [online] Available at: https://finance.yahoo.com/q/co?s=XOM+Competitors [Accessed 28 Sep. 2014]. Monsanto.com, (2014). Monsanto 10k form. [online] Available at: http://www.monsanto.com/investors/documents/annual%20report/2013/2013-monsanto-10-k.pdf [Accessed 28 Sep. 2014]. Sec.gov, (2014). WMT 10-K. [online] Available at: http://www.sec.gov/Archives/edgar/data/104169/000010416913000011/wmt10-k.htm [Accessed 28 Sep. 2014].