Ten Best Managed Companies In America: Fedex And Cisco
From 24/7 Wall St.
We set out to pick the ten best managed companies in America for the year that began June 2005 and ended June 2007. At this point virtually all companies have reported their
June financials and filed their 10-Qs.
We looked only at companies with market capitalizations of over $1 billion. Most of the companies on the list are much larger. We looked at several financial measurements: return on invested, return on asset, return on equity, gross margins, sales growth over one, three and five years and operating income growth over the same period. To be fair, we made the comparisons within industries so we would not be comparing airlines with banks.
The other important aspect to our evaluation, and the most difficult, is picking companies where management mattered. In an industry where all companies are doing very well, good management may not be the single most important key to financial and stock market performance. In difficult industries strong management may save a company. We looked for a combination of excellent long-term strategic decisions and tactical expertise in areas like marketing, operations, or manufacturing.
The companies are not presented in any particularly order. The first company on the list is not considered better managed than the company presented in the sixth or seventh place. We will cover two companies each day for the week so that by Friday the full list of ten will have been posted.
9. Fedex (FDX) Five years ago, Fedex traded at below $40. Today it changes hands at $105. Air freight services from the airlines have taken a run at the Fedex overnight delivery franchise. So has Airborne. So has UPS. And, ditto the US Postal Service. At this point, Fedex even flies mail for the US Mail
But, Fedex is still aloft. Over the last three fiscal years (ending May 31) Fedex’s revenue has gone from $24.7 billion to $29.4 billion to $32.3 billion. In the quarter ending May 31, revenue hit $8.5 billion and operating income clocked in at $927 million.
Fedex has been in business for 35 years. Since 1998, revenue has been up every year. With the exception of a small glitches in 2000 and 2004, so has operating income. It is rare to find a company that has done this well for this long.
10. Cisco (CSCO) Cisco weathered the storm of the tech bubble downturn and is the better for it. With its purchase of Scientific Atlanta, the company not only dominates enterprise networking and routing, it also has a potential conduit directly into tens of millions of television in the home.
Cisco has also sharply cut costs over the last few years, making it unusually efficient. Cisco’s cost of goods sold dropped from $11.2 billion in 2001 to $8.1 billion last year. However, revenue was up about 10% between the two periods.
With VoIP subscriptions increasing and internet traffic rising sharply, Cisco has positioned itself at the cross roads of some of the fastest growing industries in the world. And, return on equity already stands at over 23%.
At $23.70, Cisco’s stock is at a two-year high.
Earlier companies:
1. Altria is here.
2. General Motors is here.
3. Illumina is here.
4. ExxonMobil is here.
5. Starbucks is here.
6. Hewlett-Packard is here.
7. Genentech is here.
8. Goldman Sachs is here.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in companies that he writes about.
We set out to pick the ten best managed companies in America for the year that began June 2005 and ended June 2007. At this point virtually all companies have reported their
June financials and filed their 10-Qs.
We looked only at companies with market capitalizations of over $1 billion. Most of the companies on the list are much larger. We looked at several financial measurements: return on invested, return on asset, return on equity, gross margins, sales growth over one, three and five years and operating income growth over the same period. To be fair, we made the comparisons within industries so we would not be comparing airlines with banks.
The other important aspect to our evaluation, and the most difficult, is picking companies where management mattered. In an industry where all companies are doing very well, good management may not be the single most important key to financial and stock market performance. In difficult industries strong management may save a company. We looked for a combination of excellent long-term strategic decisions and tactical expertise in areas like marketing, operations, or manufacturing.
The companies are not presented in any particularly order. The first company on the list is not considered better managed than the company presented in the sixth or seventh place. We will cover two companies each day for the week so that by Friday the full list of ten will have been posted.
9. Fedex (FDX) Five years ago, Fedex traded at below $40. Today it changes hands at $105. Air freight services from the airlines have taken a run at the Fedex overnight delivery franchise. So has Airborne. So has UPS. And, ditto the US Postal Service. At this point, Fedex even flies mail for the US Mail
But, Fedex is still aloft. Over the last three fiscal years (ending May 31) Fedex’s revenue has gone from $24.7 billion to $29.4 billion to $32.3 billion. In the quarter ending May 31, revenue hit $8.5 billion and operating income clocked in at $927 million.
Fedex has been in business for 35 years. Since 1998, revenue has been up every year. With the exception of a small glitches in 2000 and 2004, so has operating income. It is rare to find a company that has done this well for this long.
10. Cisco (CSCO) Cisco weathered the storm of the tech bubble downturn and is the better for it. With its purchase of Scientific Atlanta, the company not only dominates enterprise networking and routing, it also has a potential conduit directly into tens of millions of television in the home.
Cisco has also sharply cut costs over the last few years, making it unusually efficient. Cisco’s cost of goods sold dropped from $11.2 billion in 2001 to $8.1 billion last year. However, revenue was up about 10% between the two periods.
With VoIP subscriptions increasing and internet traffic rising sharply, Cisco has positioned itself at the cross roads of some of the fastest growing industries in the world. And, return on equity already stands at over 23%.
At $23.70, Cisco’s stock is at a two-year high.
Earlier companies:
1. Altria is here.
2. General Motors is here.
3. Illumina is here.
4. ExxonMobil is here.
5. Starbucks is here.
6. Hewlett-Packard is here.
7. Genentech is here.
8. Goldman Sachs is here.
Douglas A. McIntyre can be reached at douglasamcintyre@gmail.com. He does not own securities in companies that he writes about.
posted by douglas mcintyre at 7:41 AM
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