Stocks
In this blog, we continue our three-part series where we compare two companies rather than analyzing them.
Leggett & Platt Inc (covered in Blog 8) is an American company that designs engineered components typically found in homes and automobiles. Its mission is to make life more comfortable for all its consumers.
Avnet Inc is an American company that distributes electronic components and services to various manufacturers. Its mission is to usher customers into the next era of technology.
Refer to the figure below for a financial comparison between Avnet and Leggett & Platt.
| Leggett & Platt Inc | Avnet Inc | Advantage | |
| Stock Price | $34.77 | $40.56 | Avnet Inc |
| Current Ratio | 1.58 | 2.02 | Avnet Inc |
| Quick Ratio | 0.81 | 1.12 | Avnet Inc |
| Gross Margin | 20.47% | 11.47% | Leggett & Platt Inc |
| Operating Margin | 10.99% | 3.33% | Leggett & Platt Inc |
| Profit Margin | 7.93% | 0.99% | Leggett & Platt Inc |
| Return on Total Assets | 7.71% | 5.65% | Leggett & Platt Inc |
| Return on Equity | 25.22% | 12.70% | Leggett & Platt Inc |
| ROIC | 11.90% | 9.55% | Leggett & Platt Inc |
| Debt-to-Equity Ratio | 2.22 | 1.19 | Leggett & Platt Inc |
| 1-Year Performance | -31.07% | 4.26% | Avnet Inc |
| 5-Year Performance | -34.18% | 4.10% | Avnet Inc |
| P/E Ratio | 11.85 | 7.99 | Leggett & Platt Inc |
| P/S Ratio | 0.9 | 0.18 | Avnet Inc |
| Revenue | $5.244B | $23.165B | Avnet Inc |
| Market Cap | $4.69B | $4.23B | Leggett & Platt Inc |
| Enterprise Value | $6.40B | $5.31B | Leggett & Platt Inc |
| Revenue QoQ | 14.89% | 31.96% | Avnet Inc |
| Revenue YoY | 19.57% | 25.43% | Avnet Inc |
| EBIT Margin | 11.61% | 3.32% | Leggett & Platt Inc |
| EBITDA Margin | 12.03% | 4.29% | Leggett & Platt Inc |
| EBITDA | $630.60M | $993.81M | Avnet Inc |
| Volatility | 3.24% | 3.78% | Avnet Inc |
| Beta | 0.9 | 0.95 | Avnet Inc |
| RSI | 45.06 | 36.76 | Leggett & Platt Inc |
| Gross Profit | $1.038B | $2.24B | Avnet Inc |
| Operating Income | $548.7M | $281.41M | Leggett & Platt Inc |
| Total | 14 | 13 | Leggett & Platt Inc |
From an initial glance, it seems that Leggett & Platt is overall a better company. This assumption is correct, however, only in the short term. In this case, we define short-term as around six to eight months.
Leggett & Platt has better gross, operating, and profit margins than Avnet. They are also less risky and have more “worth.” However, because these advantages apply only on a quarterly financial basis, they serve no purpose when we look at the long term. In 1-year growth and 5-year growth, Avnet has a clear advantage. Moreover, when it comes to gross profit, YoY Revenue, or current and quick ratios (all financial statistics that measure the long-term), it becomes clear that Avnet is a better investment for the long term.
Thus, we can deduce Avnet is a better growth stock and Leggett & Platt is a better value stock.
Financial Term
The financial term for this blog is return on equity (ROE), which measures a corporation’s profitability in relation to stockholder’s equity. This metric is one of the most vital for investors to analyze: a very high return on equity means that a company can increase its profit generation without needing as much capital to fund its needs and operations.
Finance4Scholars 