The Ten Best American Companies: Part 2
Tyler is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
I previously discussed three companies that have all outperformed the S&P, show good metrics moving forward, have excellent employee satisfaction, and show consistency in virtually every area. Costco, Colgate, and Google all have great qualities, great products, and great performance. My search for the ten best American companies has continued, and my next four either deal with apparel or edible products.
Although the company isn't huge, only a $5.2 billion market cap, its sales have tripled in just the past five years. Often times I am impressed with Wal-Mart’s return policy, but Under Armour's (NYSE: UA) return policy covers all basis. They claim, "If you are not 100% satisfied with your gear, return it for a full refund. Anytime. Any Reason. Guaranteed." The clothing, worn by amateur and professional athletes alike, has the unique ability to keep athletes dry and light in a world of heavy, wet, sweat gear.
In 2007 Under Armour's sales were $607 million, but just eclipsed the $1.8 billion mark in 2012. Not bad for a company that was founded in a grandmothers basement. For the sake of comparison, Under Armour has outperformed the S&P 500 by almost exactly 160% in the past five years. Return on Equity (ROE) and Return on Invested Capital (ROIC) have been nearly identical since 2006, and EPS have increased eight of the past ten years. The company does seem to be a little bit pricey for my liking with only a 2.9% Free Cash Flow (FCF) yield.
Coach (NYSE: COH) is the company that handbag lovers love. It is also the company that handbag companies aspire to be. Coach is on its way to over $5 billion in sales for fiscal 2013. This is nothing to be ashamed of, as just five years ago, the company posted $2.6 billion in revenues, and has averaged an annual 12% growth. While posting these impressive numbers, the company is/has looked into expanding into men’s apparel products. While this isn't a concern for me right now, I am concerned that this may interfere with its innovation of handbags in the future.
While the company's EPS decreased in 2009, it was the only EPS decrease of the decade for Coach. How profitable is the company? How about gross margins of nearly 73%? That's not to mention its ROE and ROIC rising steadily with each other for most of the past decade. The company shows a market cap of $13.8 billion, and a FCF yield of 7.2%. Aside from its potential concerns in the future, the company shows nothing but promising figures for investors right now. Coach's stock has increased 64.28% in the past five years, which is impressive considering the S&P 500 has only risen 14.75% in the same time period.
Whole Foods Markets (NASDAQ: WFM) probably doesn't need an introduction, but they have disrupted the low-growth, low-margin sector of grocery retailers. They have become well known for their donations to non-profit organizations. Over the past three-fiscal years, they have averaged more than 10% of after-tax profits being donated to these non-profits.
With approximately a 372% increase in revenues over the past decade and 147% in the past five years, they have a market cap of $15.9 billion. The company tries to sell its products as cheaply as possible, but it still maintains a respectable 35.5% gross margin. Its shareholders have to be happy as the company has outperformed the S&P 500 by more than 126%. Despite all these promising numbers, Whole Foods still maintains that quality and sustainability are more important than just achieving the lowest possible price.
Pepsi (NYSE: PEP) is more than just a drink. In fact, they manufacture and sell 22 beverage, snack, and food brands aside from the Pepsi brand which was recently named 22nd most valuable brand in the world. The company is currently working to develop new ways to market healthier products due to consumer’s recent spike in health awareness. With nearly 300,000 worldwide employees, and over 105,000 in the U.S., the company provides a full list of benefits for their health and financial wellness. Current management has made the company an "evolver" despite the age of the company.
Revenues have increased approximately 247% in the past decade to more than $65 billion annually. EPS have risen seven of the past ten years from $2.05 to $3.92. With a market cap of $118 billion and a FCF yield of nearly 5%, the company appears to be fairly priced. Its gross margins haven't been below 50% for the past decade and are currently 52.2%. If Pepsi can successfully develop and market healthier products, the sky is the limit. We know the company well, but imagine what could happen if they design products that weren't as damaging to our health.
The Foolish Conclusion...
Under Armour, Coach, Whole Foods, and Pepsi all appear to be moving in the right direction - and some are performing historically. These companies show markets that are expanding, products that are superior to others of competitive nature, and most importantly, they show promising management which normally correlates to great performance.
This is the second of three posts in my "The Ten Best American Companies" series. Check back soon for my last group of great companies. Also, make sure to check out the previous three companies here.
tlwofford has no position in any stocks mentioned. The Motley Fool recommends Coach, PepsiCo, Under Armour, and Whole Foods Market. The Motley Fool owns shares of Coach, PepsiCo, Under Armour, and Whole Foods Market. 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!