Estimates of UPS’s PE and PB multiples vs. best in breed
- How do your estimates of UPS’s PE and PB multiples compare with those for FedEx? How do they compare with those for the “best in breed” companies multiples?
The table below shows the estimates of the UPS vs. those of the FedEx
DETAILS
P/E
P/REVENUE
P/B
UPS
20
0.75
2.5
FEDEX
10
0.35
2.68
I estimated the values of the UPS to double those of the FedEx company because the company growth for UPS is twice as much as those of the FedEx Corp. Therefore, the price to earnings of the UPS will be double that of FedEx. But for the price to book value the both company’s asset is favorable.
The financial analysts classify groups the companies the same way the classification of the animal in a similar fashion the way Charles Darwin classified the animals. First, you rank the companies according to what they produce. Later you will need to organize those companies that are within the same industry by comparing financial metrics, ratio and company’s brand, and reputation. For a company to qualify to be in the classification of the best in the breed (BOB) such a company is supposed to have the secure financial and technological infrastructure.
The brand and the reputation of the company is a crucial factor in classifying a firm in BOB category. For example, the brand of Coca-Cola Company has influence all over the world as well as an excellent reputation. The customers are passionate about the company’s product (Light, Hollan, & Wills, K. (2001). For example, when the Coca-Cola Company tried to eliminate its original brand to exchange with the new brand. The customer was furious. In that, as the company has established itself. In that regards, the company’s brand is selling, and thus it’s stock values are high.
The UPS and FedEx are the leading companies in the supply chain industry and compared to their sector; the two firms are the leaders in the market. However, when we compare with other areas such as technology their stick value is lower than that of the BOB firms in the technology industries.
Refrences
Light, B., Holland, C. P., & Wills, K. (2001). ERP and best of the breed: a comparative analysis. Business Process Management Journal, 7(3), 216-224.