Table 11.2 High Profit Margins Indicate Competitive Advantages
Company Name Industry
P/E Ratio (5-
year avg.)
Return on
Equity (%)
Profit Margin
(Return on Sales, %)
Total Asset
Turnover
Leverage
Ratio
Altria Group Cigarettes 14.0 33.5 12.7 0.9 3.1
American Standard Companies Inc. General Building Materials 19.6 71.5 4.6 1.5 7.1
Anheuser-Busch Companies, Inc. Beverages – Brewers 20.4 61.1 8.6 0.9 4.4
AutoZone, Inc. Auto Parts Stores 15.5 115.7 9.7 1.3 8.5
Ball Corporation Packaging & Containers 17.0 31.6 5.1 1.2 4.9
Table 11.3 Profit Margins Can Be Good Indicators of Future Profits
Dependent Variable Intercept
Profit Margin
(MGN)
Total Asset
Turnover
(TAT)
Leverage
(LVG)
R2F-statistic
P/E Ratio (5-year avg.)
20.4050 0.0182 1.6% 0.45
(12.42) (0.03)
SUMMARY OUTPUT
Regression Statistics
ANOVA
df SS MS F Significance F
Regression 1 12.48875432 12.48875432 0.446545302 0.509451697
X Variable 1 0.018199787 0.027235386 0.668240452 0.509451697 -0.037589372 0.073988945 -0.037589372 0.073988945
SUMMARY OUTPUT
Regression Statistics
Observations 30
ANOVA
df SS MS F Significance F
X Variable 1 0.589645825 0.088045275 6.697075177 2.86622E-07 0.409293258 0.769998393 0.409293258 0.769998393
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.403340712
ANOVA
df SS MS F Significance F
X Variable 1 -2.869496989 1.230267246 -2.332417609 0.027093585 -5.389585168 -0.349408809 -5.389585168 -0.349408809
R Square 0.16268373
Adjusted R Square 0.132779578
Standard Error 4.877612712
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.362173137
ANOVA
df SS MS F Significance F
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
X Variable 1 -0.768028097 0.373550581 -2.056021691 0.049210544 -1.533211764 -0.00284443 -1.533211764 -0.00284443
R Square 0.131169381
Adjusted R Square 0.100139717
Standard Error 4.968555068
SUMMARY OUTPUT
Regression Statistics
Multiple R 0.786506
Observations
30
ANOVA
df SS MS F
Significance F
Regression
3492.1389 164.0463 14.05618 1.22E-05
Coefficients
Standard Error
t Stat P-value
Lower 95%
Upper 95%
Lower 95.0%
Upper 95.0%
Intercept 13.5053 3.558214 3.795528 0.000795 6.191288 20.81932 6.191288 20.81932
SUMMARY OUTPUT P/E and ROE
Regression Statistics
ANOVA
df SS MS F Significance F
Regression 1 11.22748041 11.22748041 0.081186693 0.777792584
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
X Variable 1 -0.042312445 0.148499741 -0.284932788 0.777792584 -0.346500718 0.261875827 -0.346500718 0.261875827
SUMMARY OUTPUT P/E and MGN
Regression Statistics
Multiple R 0.571174096
R Square 0.326239848
Adjusted R Square 0.302176985
Standard Error 9.666741383
Observations 30
ANOVA
df SS MS F Significance F
Regression 1 1266.922109 1266.922109 13.55781536 0.000978664
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
X Variable 1 1.168444443 0.317331518 3.682093882 0.000978664 0.518419564 1.818469321 0.518419564 1.818469321
SUMMARY OUTPUT P/E and TAT
Regression Statistics
Multiple R 0.216966276
R Square 0.047074365
Adjusted R Square 0.013041307
Standard Error 11.49626971
Observations 30
ANOVA
df SS MS F Significance F
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
X Variable 1 -5.835692996 4.961930653 -1.176093219 0.249460572 -15.9997586 4.328372606 -15.9997586 4.328372606
SUMMARY OUTPUT P/E and LVG
Regression Statistics
Multiple R 0.123525765
R Square 0.015258615
Adjusted R Square -0.019910721
Standard Error 11.68660954
Observations 30
ANOVA
df SS MS F Significance F
Multiple R 0.053769339
R Square 0.002891142
Adjusted R Square -0.032719889
Standard Error 11.75976725
Observations 30
Total 29 3883.407
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
X Variable 1 -0.263994486 0.400792315 -0.658681508 0.515480688 -1.084981248 0.556992275 -1.084981248 0.556992275
SUMMARY OUTPUT P/E on MGN, TAT, LVG
Regression Statistics
Multiple R 0.583891111
R Square 0.340928829
Adjusted R Square 0.264882156
Standard Error 9.921696501
Observations 30
ANOVA
df SS MS F Significance F
Total 29 3883.407
Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%
X Variable 1 1.022968808 0.38896764 2.629958648 0.014156772 0.22343385 1.822503766 0.22343385 1.822503766
X Variable 2 -4.173014792 6.655573572 -0.626995517 0.536129628 -17.85375116 9.507721581 -17.85375116 9.507721581
X Variable 3 -0.374485531 0.497836571 -0.752225836 0.458671685 -1.39780393 0.648832867 -1.39780393 0.648832867