Procter & Gamble (P&G) is a Fortune 500 American multinational corporation headquartered in downtownCincinnati, Ohio and manufactures a wide range of consumer goods. In 2011, P&G recorded $82.6 billion dollars in sales. Fortune magazine ranked P&G at fifth place of the "World's Most Admired Companies" list, which was up from sixth place in 2010. Procter & Gamble is the only Fortune 500 company to issue C Share common stock.
Unilever is a British-Dutch multinational corporation that owns many of the world's consumer product brands in foods, beverages, cleaning agents and personal care products. The company’s products are sold in more than 180 countries. The Group launched more than 100 brands into new markets in 2010. More than 167,000 people work for Unilever and more than 50% of the business is in emerging market. Company’s Sustainable Living Plan, launched in 2010, is helping more than a billion people take action to improve their health and well-being.
Colgate-Palmolive Company is an American multinational corporation which is focused on the production, distribution and provision of household, health care and personal products – soaps, detergents and oral hygiene products. Colgate-Palmolive Company is a global leader in the consumer products industry. The company operates its business through two product segments, Oral, Personal and Home Care; and Pet Nutrition.
Shiseido Company, Lim is a major Japanese care and cosmetics producer. It is the oldest cosmetics company in the world and the fourth largest cosmetics company in the world. The foundation of Shiseido laid over a century ago, its pioneering spirit that combines eastern aesthetics with western science and business technology, continues to live on today to serve as the underlying philosophy of Shiseido's corporate activities.
Beauty Packaging's third annual Top 20 global companies offers a look at the sales and marketing activities of the leading beauty and personal products companies around the world. According to these results, Procter & Gamble tops the list, with Unilever being on the third, Shiseido on the sixth and Colgate-Palmolive on the fourteenth place.
The analyses of annual reports of the companies showed the following results:
The current ratio is used to give an idea of the company's ability to pay back its short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The information at the table shows that Shiseido and Colgate-Palmolive are performing best, because their current ratios are above 1, which means that they have positive working capital and are able to pay their debts with current assets. Unilever and P&G have negative working capital because their current ratios are less than 1. This may happen because customers pay upfront and so rapidly, the businesses have no problems raising cash.
The quick ratio, is a more stringent test of liquidity than the current ratio. It is obviously a good position for the firm to be in when the quick ratio is more than 1. It can meet its short-term debt obligations with no stress. But if the quick ratio is less than 1, then the firm would have to sell inventory to meet its obligations. On the table for the quick ratio Shiseido company is obviously doing better than the rest, while other companies should probably reconstruct their financial policies.
Accounts Receivable Turnover
Account receivable turnover is an accounting measure used to quantify a firm's effectiveness in extending credit as well as collecting debts. The receivables turnover ratio is an activity ratio, measuring how efficiently a firm uses its assets.
Considering the ratios represented above, and comparing the years 2009 and 2010, we can notice that Colgate – Palmolive and Unilever are doing better than other two companies since they have their receivables turnover improved, with Colgate – Palmolive doing slightly better than Unilever. Referring to other two companies Shiseido and P&G, it can be seen that their receivables turnover have decreased, where P&G’s receivables turnover decreased slightly more than Shiseido’s. In overall, P&G and Unilever have better receivables turnover than Shiseido and Colgate-Palmolive.
Inventory turnover is a ratio showing how many times a company's inventory is sold and replaced over a period. A low turnover implies poor sales and, therefore, excess inventory. A high ratio implies either strong sales or ineffective buying. High inventory levels are unhealthy because they represent an investment with a rate of return of zero. In this industry the companies P&G, Colgate-Palmolive and Shiseido are performing better because they have the highest ratios. Unilever shows lower inventory turnover, which may indicate less sales and increase in average inventory compared to the other three companies.
Liabilities-to-equity ratio is a measure of a company's financial leverage, which indicates what proportion of equity and debt the company is using to finance its assets. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. The debt/equity ratio also depends on the industry in which the company operates. The companies resemble almost the same values of debt -to-equity that vary from 0.90-1.1. All the companies operate in capital-intensive industry. This is the reason why the values of the ratio are not so high.
Earnings per share (EPS) represents the portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability. In case of these companies, Shiseido and Unilever are companies whose EPS has improved while Colgate-Palmolive and P&G’s EPS has decreased. As a conclusion from the showed information it can be concluded that Unilever is in the best position, while P&G is in the worst out of the four companies
Dividend yield is a financial ratio that shows how much a company pays out in dividends each year relative to its share price. In the absence of any capital gains, the dividend yield is the return on investment for a stock. Unilever and P&G have higher dividend yield than Colgate – Palmolive and Shiseido, which means that the first two companies have better rate of return to common stock-holders from cash dividends.
From the companies’ financial statements analyses we can conclude the following:
P&G has strong market share, a balanced portfolio of brands, and innovative premium-priced products in both mature and emerging markets. P&G is better than its peers with a 14% cash-conversion ratio, which captures the company’s operational efficiencies. If you are a long-term investor, you should consider buying P&G’s stocks to your portfolio. Its personal care focus, its history of creating new products to meet consumers’ needs, its near 50% dividend payout and its strong cash flow give it a stable outlook and make it a compelling choice for those looking to buy and hold quality stocks.
Unilever is the world's second-largest consumer goods company. The summary investment rationale is Unilever being on the cusp of delivering consistent profit growth - the market has yet to truly recognize - as a result of innovation, re-investment and a strong emerging markets presence. Unilever is the one to consider the first means for investment: people may not make much profit, but it provides with reliability. It is a good company to invest because low risk protects your wealth against inflation.
Referring to the Colgate-Palmolive company, and the great question: "Should you invest in the company or not?", there are a few factors that should be used. As shown earlier in the paper, there have been declines in most of the ratios of the company, which would lead to an answer that we should not invest, but if we compare years 2009, 2010 and 2011 and see net incomes for Septembers of these years, we can see that there is increase of money.
Shiseido has average level in terms of ratios, 2011 was not the best year for Shiseido, which is owned to the fact that the Company suffered an increase in liabilities and cost of sales, that made it less profitable. However, the company reports good results in liquidity and inventory ratios and it is a good chance to invest in the long run due to its stable position.
In overall, we can conclude that the four companies are stable and reliable in the long-run, while they have slight decline in FYE 2010, compared to FYE 2009. Intensified competition in the market means the need for competitive marketing, which has led to an increase in marketing expenditure. At the same time, deterioration of the companies’ financial situation may be caused by the worldwide financial crisis and decrease of consumers’ activity.