How Tebow's College Career Resembles These 4 Companies
Tyler is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
As an investor, I generally pay a lot of attention to the different metrics of a company, and then decide whether to invest or leave the company alone. Often times investors fail to take leadership and business model into account, and they miss out on enormous opportunities. There are a few companies whose business model and leadership are their main reason for success.
I'm not saying to disregard metrics for these next companies (some of them have very good metrics), but I am suggesting that we should look at other factors. Tim Tebow supposedly didn't have the mechanics to play college football, yet is the most decorated quarterback to ever play at the collegiate level. Although his NFL career is questionable, his college success was remarkable. Some accomplishments include being the recipient of: The Heisman trophy, quarterback of the year, and leading the Florida Gators to more than one national championship game.
John Donahoe became CEO in 2008, and has seen eBay (NASDAQ: EBAY) succeed in many ways. John was named as the fourth best "business person of the year" in 2012 by CNNMoney.com. In his time with eBay, John has taken shareholders on a ride worth remembering. In fact, over the past five years the stock has increased by an average of more than 19% annually. With approximately 30,000 current employees, the company boasts a market cap of over $71 billion. Fortunately for investors, eBay does show some pretty solid metrics. Its P/E of 27.6 is beating the industry average by a whopping 15.9. Revenues have increased 65% in five years, but the company does show a FCF yield of just 3.6%.
Primerica Financial Services (NYSE: PRI) is the largest financial services marketing organization in North America. Obviously they are doing something right as approximately 20% of its representatives have worked with the firm for at least twelve years. Tim Tebow often reminds us of the quote "Hard work beats talent when talent doesn't work hard." When the company was founded in 1977, Primerica had to overcome insurance companies filing complaints and taking up law suits against them for simply replacing their whole life insurance products with Primerica's term life insurance. To this day Primerica representatives claim to "Join a crusade to right a wrong in the industry."
Primerica spun off from Citi group in April of 2010, and its shareholders have been rewarded kindly. From the time of its Initial Public Offering (IPO) the stock has increased nearly 63% and shows a P/E of 8.9 less than the industry average. It has outperformed both the life insurance industry and S&P 500 in 2012 - not to mention having nearly doubled their returns YTD. Approximately 85% of Americans are classified as middle income, and that's where Primerica focuses its efforts. Representatives for most firms are penalized for opening investment accounts with less than $250,000 - Primerica makes money through monthly investments (with no set minimum) of $50 or more.
Google (NASDAQ: GOOG) recently became the first tech company to achieve a stock price of $800/share. Many analysts believe the stock will reach the $1,000/share before 2014. Google acquires most of its revenues through search ads, but with Google holding approximately 70% of the worldwide market share in mobile devices; it appears to be headed in a good direction. Google appears to be making very wise decisions, something Tim Tebow talks about frequently. In most of his post-game interviews Tim claims he wants to "Be the best decision maker I can be."
Google's revenues increased 32% in 2012, and have seen Earnings Per Share (EPS) increase annually for over a decade. Google's P/E is 3.5 lower than the industry average of 28.3, and its gross margins are 34% higher than the industry average. The company's CEO, Larry Page, seems to be making decisions that appear to lead the company to the promised land.
Jeff Bezos has quickly become one of the most respected and acknowledged CEO's in today's society. In 2012, he was named as the top business person by CNNMoney.com, and Amazon (NASDAQ: AMZN) should be proud to have him guiding them through the jungle of competition. The company has increased over 116% in the past five years, yet Amazon is probably the most obvious example of how metrics don't necessarily relate to success. Jeff has developed a mindset of "It doesn't matter how much profit there is, as long as there is some." He doesn't care if the company only makes ten cents per product, because the company will likely sell more products than anyone else.
Aside from its stock, revenue increases are about the only promising metric you can find when analyzing Amazon. After a decade of consecutive annual increases, they increased 27% in 2012, 319% in the past five years, and 1,160% in the past decade. Their EPS are in the negatives, their FCF yield is practically zero, and their P/E is -3,333 - but this doesn't mean to sell the company. Jeff has made it very clear that his goal is not for immediate metrical success, but he encourages investors to think long term. Often times Tim Tebow would play horribly for the first three quarters, but find a way to win in the fourth quarter. Despite Amazon's measly metrics, the company is focused on the long term achievement of success, which to them is the measurement of victory.
The chart below shows how successful these companies have been despite some (or many) questionable metrics.
The Foolish Conclusion...
Just like a good quarterback, leadership is often more important than numbers. Yes, some of these companies have both, but some are successful with metrics that make many investors cringe. Does it really matter how it looks, how it’s accomplished, or if it makes sense, as long as they are successful? Just remember, a company’s leadership and business models often drive success more than just a set of numbers.
We can't control what happens with Tim Tebow and his questionable NFL career, but don't be stuck sitting on the bench as these companies produce game changing performances.
tlwofford has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, eBay, and Google. The Motley Fool owns shares of Amazon.com, eBay, and Google. 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!