Sarge85
11-07-2005, 12:57 PM
Can you explain this to me about BUD
Could be something – most likely it’s nothing.
BUDweiser has a shrinking Book Value. As I understand it Book Value is simply Shareholder Equity divided by Total Outstanding Shares.
A look at the balance sheet and 10 year summary shows that the book value figure is decreasing, not from more shares be outstanding, (actually they have been reducing) – but rather a real reduction in Shareholder Equity. Going back to 1995 there has been a steady decrease in book value.
From Valueline:
BUD Book Value/ Share EPS
1995 4.36 .95
1996 4.05 1.11
1997 4.15 1.18
1998 4.43 1.27
1999 4.33 1.47
2000 4.60 1.69
2001 3.62 1.89
2002 3.65 2.20
2003 3.35 2.48
2004 3.43 2.77
Intuitively this seems backwards. Conventional wisdom, and basic mathematics would suggest that as the Book Value decreases, EPS is going to shrink.
EPS = Book Value times Return on Equity
Book Value has decreased at a compounding rate of -2.63%
EPS has increased at an attractive 12.63% over this period.
Sales have only increased 4.17% over said period.
Obviously BUD’s ROE must be high – it is. Over the last three years it has been 60.3%, 74% and 80.8%.
At one point will this increasing ROE be unsustainable? How can a company shrink its equity, but increase EPS more than 3 times that what it is increasing in sales?
Am I comparing apples to oranges?
Sarge/images/graemlins/diamond.gif
Could be something – most likely it’s nothing.
BUDweiser has a shrinking Book Value. As I understand it Book Value is simply Shareholder Equity divided by Total Outstanding Shares.
A look at the balance sheet and 10 year summary shows that the book value figure is decreasing, not from more shares be outstanding, (actually they have been reducing) – but rather a real reduction in Shareholder Equity. Going back to 1995 there has been a steady decrease in book value.
From Valueline:
BUD Book Value/ Share EPS
1995 4.36 .95
1996 4.05 1.11
1997 4.15 1.18
1998 4.43 1.27
1999 4.33 1.47
2000 4.60 1.69
2001 3.62 1.89
2002 3.65 2.20
2003 3.35 2.48
2004 3.43 2.77
Intuitively this seems backwards. Conventional wisdom, and basic mathematics would suggest that as the Book Value decreases, EPS is going to shrink.
EPS = Book Value times Return on Equity
Book Value has decreased at a compounding rate of -2.63%
EPS has increased at an attractive 12.63% over this period.
Sales have only increased 4.17% over said period.
Obviously BUD’s ROE must be high – it is. Over the last three years it has been 60.3%, 74% and 80.8%.
At one point will this increasing ROE be unsustainable? How can a company shrink its equity, but increase EPS more than 3 times that what it is increasing in sales?
Am I comparing apples to oranges?
Sarge/images/graemlins/diamond.gif