Blog 11


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 IncAvnet IncAdvantage
Stock Price$34.77$40.56Avnet Inc
Current Ratio1.582.02Avnet Inc
Quick Ratio0.811.12Avnet Inc
Gross Margin20.47%11.47%Leggett & Platt Inc
Operating Margin10.99%3.33%Leggett & Platt Inc
Profit Margin7.93%0.99%Leggett & Platt Inc
Return on Total Assets7.71%5.65%Leggett & Platt Inc
Return on Equity25.22%12.70%Leggett & Platt Inc
ROIC11.90%9.55%Leggett & Platt Inc
Debt-to-Equity Ratio2.221.19Leggett & Platt Inc
1-Year Performance-31.07%4.26%Avnet Inc
5-Year Performance-34.18%4.10%Avnet Inc
P/E Ratio11.857.99Leggett & Platt Inc
P/S Ratio0.90.18Avnet Inc
Revenue$5.244B$23.165BAvnet Inc
Market Cap$4.69B$4.23BLeggett & Platt Inc
Enterprise Value$6.40B$5.31BLeggett & Platt Inc
Revenue QoQ14.89%31.96%Avnet Inc
Revenue YoY19.57%25.43%Avnet Inc
EBIT Margin11.61%3.32%Leggett & Platt Inc
EBITDA Margin12.03%4.29%Leggett & Platt Inc
EBITDA $630.60M$993.81MAvnet Inc
Volatility3.24%3.78%Avnet Inc
Beta0.90.95Avnet Inc
RSI45.0636.76Leggett & Platt Inc
Gross Profit$1.038B$2.24BAvnet Inc
Operating Income$548.7M$281.41MLeggett & Platt Inc
Total1413Leggett & 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.