Is there anything more prestigious than being among the world’s largest companies? Fortune magazine publishes an annual list of the world’s largest publicly traded companies. The publication calls this prestigious list the Fortune 500. Each year, the magazine releases a revised edition of the list, with new company entries and some companies being dropped due to financial or legal troubles. The magazine also publishes a list of the 100 largest privately held companies in the United States (the Fortune 100) and a list of the 1000 largest publicly traded companies worldwide (the Fortune 1000).
The Fortune 500, 100, & 1000 marketing rankings are important lists to track as they reveal the general health of the business world as well as the direction marketing departments should take in 2021 and beyond. Essentially, these lists measure a company’s market share, revenue, and net income. All three numbers are equally important and, taken together, give a complete picture of a company’s size and performance. This article will give you a complete overview of how to analyze the financials for the 2021 Fortune 500, 100, & 1000 marketing rankings.
How To Read The Financial Numbers
Due to confidentiality agreements and other legal restrictions, the financial information for the 2021 Fortune 500, 100, & 1000 marketing rankings is not available to the general public. However, we can pull statistical information from the United States Securities and Exchange Commission (SEC) and the worldwide stock market via Finwise.com. The numbers themselves aren’t pretty and it takes some serious number-crunching to get a sense of a company’s true financial posture. However, knowing what to look for and how to read the numbers can put a company’s financial health and performance into perspective. Here’s a primer on how to read the financials of any company whether you’re an investor, manager, or just a fan.
Revenue is, generally speaking, a company’s total earnings before interest and taxes (EBIT). This is also known as the “bottom line.”
Simply put, revenue is the amount of money a company brings in from sales of its products, minus any costs associated with producing those products (like raw materials, administrative expenses, shipping charges, and overheads).
The most direct way to analyze revenue is to look at a company’s income statement. An income statement contains two kinds of information:
- The revenue of the company; and
- The costs incurred in producing the revenue (like materials, labor, and overheads).
The two are easily distinguishable. The revenue is easy enough to spot as it represents the money coming in from sales of the company’s products or services. The costs, on the other hand, are the things that the company needs to spend money on in order to make a profit. For example, the company may spend money on research and development (R&D) or on marketing and sales to attract customers.
Taking the time to track these numbers down into multiple periods (like monthly, weekly, and monthly) and comparing them can give you a good idea of how the business is doing. If you’re curious about a company and want to dig deeper, its revenue is the first place to look as it’s often the most easily accessible part of a company’s financial results. Investors also use this figure to assess a company’s growth potential as well as its ability to generate profits.
Net income (also known as net earnings or, more commonly, just “income”) is, generally speaking, a company’s earnings after subtracting all the costs associated with producing the goods or providing the services. As mentioned above, these are mainly things like materials costs, operating expenses, and overheads. (Sometimes companies will include certain depreciation and amortization expenses in their income statement. These are the expenses they incur in buying assets, like buildings and equipment, which are then used in the production of goods or services.)
The most direct way to analyze net income is to look at a company’s statement of income. A statement of income contains the same kinds of information as an income statement discussed above but it is usually presented in the form of a table or a bar chart. A typical statement of income for a company appears as follows:
- (Operating expenses);
- (Gain/loss on disposal of assets);
- (Gain/loss on trading in securities);
- (Interest expense);
- (Profit/(Loss) before income taxes);
- (Income tax expense);
- (Adjustment for income taxes);
- (Net income/(loss); and
- (Equity in earnings) (or Loss).
The two are easily distinguishable. The first four categories, as mentioned above, make up the company’s income. The final two categories (net income/(loss) and equity in earnings) are sometimes called “performances” and indicate whether or not the company has performed well relative to its financial goals and expectations. These are sometimes referred to as “statement of earnings.”
Taking the time to track these numbers down into multiple periods (like monthly, weekly, and monthly) and comparing them can give you a good idea of how the business is doing. If you’re curious about a company and want to dig deeper, its net income is the second place to look as it’s often the most accessible part of a company’s financial results.
Price-to-Earnings (P/E) Ratio
The P/E ratio is the price of a stock (or index) or a fund’s highest-priced share (or index) divided by its earnings per share. This is a common way to value stocks and certain types of funds. For example, a company with a market capitalization of $10 billion and an earnings per share of $1.00 might have a P/E ratio of 50.0. In other words, if you owned a stock (or equivalent fund) in that company, you’d be paying 50 times the company’s earnings per share (EPS).
If you hold the position for only a short while, this is usually not a problem. However, if you hold the position for a number of years, this can lead to problems as the price of the stock (or equivalent fund) may become completely divorced from the company’s true financial performance. (Some investors prefer to use the PEG ratio — Price Effectiveness Ratio — as it discounts an equity’s earnings quality rather than just measuring it against its price.)
Since the price of shares (or funds) may become divorced from their underlying value, investors often avoid using this metric to analyze a company’s short- or long-term performance.
Dividends And The Yield
Dividends are, generally speaking, the portion of a company’s earnings that are regularly and regularly paid out to shareholders. The more a company pays out in the way of dividends, the greater its “yield,” all other things being equal. To determine a company’s yield, simply take the dividend (in this case, $0.50) and divide it by the share price. (Many investors in low-yielding stocks and bonds like to use dividend trackers which can make this process much easier. Dividend trackers will also alert you when a company announces a dividend so you don’t have to keep hunting down this information yourself.)
As with so many other metrics discussed here, dividends can be used to assess a company’s growth potential as well as its ability to generate profits.