This Electronic Stock Continues to Grow Stronger
Muhammad is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Koninklijke Philips Electronics NV (NYSE: PHG) has shown tremendous market performance in the recent past, and there is sufficient evidence pointing toward a positive outlook for the company’s stock. Two of the factors contributing to the strong market performance of Philips are the commendable financial performance of the company, and timely mitigation of business risks. Philips recently announced strong numbers for the fourth quarter of 2012. The company also announced the sale of its audio and video business to Funai Electric Company, and a ten year collaboration with Sint Maartenskliniek. All these factors have had a very positive impact on the market performance of the company.
Market Performance of Philips
Philips' stock price that has had more ups than downs. Shares recently hit their 52 week high, and there is no reason to believe that this will decline in the near future. The company’s stock is currently being traded within the range of $30.88 and $31.33, and its 52 week range is between $17.16 and $31.33. The extent of incline in the share price can be deducted from the difference between the two extremes in the 52 week range of the company’s share price. The following chart represents the trend of the share price of the company over the past year.
It can be observed from the chart that the stock price has followed a fairly positive trend since it hit its 52 week low in June. There have not been any significant fluctuations in the share price and the upward trend has remained steady. From the market performance, the expectation regarding the continuation of the positive trend can be developed.
Philips recently disclosed the financial information for the fourth quarter in 2012. The company reported a net loss of $460 million, which was $35.4% higher than the net loss in the same quarter last year. However, this decline does not influence the overall financial performance of the company because it was due to an anomalous payment of a fine amounting to $660 million to the European Commission. The fine was in regard to the violations of competition rules by Philips in 2001. If the impact of the fine is eliminated, the net income of the company amounts to $199.7 million. Thus, if there was no payment of fine in this period, the company’s loss would have shrunk completely. The strength of the company’s financial performance can also be evidenced by the growth in its revenue. The revenue growth for the fourth quarter was 3%, which amounts to $9.3 billion. In segment details, all the business segments of the company exhibited growth in revenues except the Innovation, Group, and Services division, which showed a 9% year-over-year decline in revenue. Thus, it can be said that the overall financial performance of the company has remained positive.
Philips also holds strong financial performance when compared to its competitor,s i.e. Panasonic Corporation (NASDAQOTH: PCRFY) and Sony Corporation (NYSE: SNE). For the fourth quarter of 2012, Panasonic reported a net profit margin of 2.89%; however, for 2012 the net profit margin was -10.48%. On the other hand, the net profit margin of Philips for 2012 was 1.92%, while for the fourth quarter in 2012 it was -2.19%. The net profit margin of Sony for 2012 was -6.14%. Therefore, it can be inferred that Philips has maintained a better net profit margin for the year 2012 compared to Panasonic and Sony. Philips has maintained an EPS of 0.58, which is higher than the EPS of Panasonic and Sony that stand at -7.26 and -5.75, respectively. This also indicates that both Panasonic and Sony have incurred much larger losses when compared with Philips.
Sale of Business Segment
Philips also announced that it has agreed to sell its ‘Lifestyle Entertainment’ segment to Funai Electric Company for around $201.5 million. Along with this consideration, Philips will also receive a brand license fee covering 5.5 years. The company also announced that it will not transfer its video business until 2017 due to “existing intellectual property licensing arrangement.”
After the analysis of multiple factors influencing the market performance of Philips, in my opinion investors should buy the shares in the company. The rationalization behind this recommendation is that the company has a strong financial performance, and there are sufficient expectations regarding profits in the prospective financial periods. The company also enjoys positive ratings by multiple analysts and investor confidence. All these factors will continue to have a positive influence on the shares of the company and the share price will continue to surge. Short term investors can benefit from the situation as the incline in share price will maximize the opportunity for capital gains.
muhammadbazil has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!