World’s Largest Companies - Revenue vs. Market Cap

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
Post Reply
User avatar
SimpleGift
Posts: 2653
Joined: Tue Feb 08, 2011 3:45 pm
Location: Central Oregon

World’s Largest Companies - Revenue vs. Market Cap

Post by SimpleGift » Thu Aug 10, 2017 10:57 am

Recently published was the Fortune Global 500, an annual ranking of the top 500 companies in the world as measured by revenue. Most striking was the contrast between the top 10 companies by revenue (at left below), and the current top 10 companies by market capitalization (at right), according to Vanguard's Total World Stock Index:
Clearly, global investors are valuing the future revenues and earnings of U.S. companies very highly! Time will tell whether this remarkable optimism will be rewarded to the degree that investors are expecting.

Thoughts?
Cordially, Todd

selftalk
Posts: 1096
Joined: Thu Mar 08, 2012 10:08 am

Re: World’s Largest Companies - Revenue vs. Market Cap

Post by selftalk » Thu Aug 10, 2017 11:04 am

Bear markets show up but not on a regular time table as do serious corrections. Buffett is most probably waiting with his cash hoard for some downside volatility to buy some "great companies at a reasonable price."

User avatar
JoMoney
Posts: 4465
Joined: Tue Jul 23, 2013 5:31 am

Re: World’s Largest Companies - Revenue vs. Market Cap

Post by JoMoney » Thu Aug 10, 2017 11:11 am

I think you're mixing up a lot of things trying to contrast in this way.
Revenue is not profit, and Vanguard Index funds are float adjusted which makes a big difference when looking at how much weight is put on a company which may be mostly owned by the state or private, but may have some fraction available as public shares...
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

Tamales
Posts: 1162
Joined: Sat Jul 05, 2014 10:47 am

Re: World’s Largest Companies - Revenue vs. Market Cap

Post by Tamales » Thu Aug 10, 2017 11:24 am

Has there ever been a period in recent history (say 30 years?) where the 10 largest by market cap was not dominated by US firms? (I don't know; just asking)

User avatar
alpine_boglehead
Posts: 83
Joined: Fri Feb 17, 2017 9:51 am
Location: Austria

Re: World’s Largest Companies - Revenue vs. Market Cap

Post by alpine_boglehead » Thu Aug 10, 2017 11:42 am

U.S. companies very highly!
I wouldn't say it's the US - it's more like the (perceived) old economy vs. the new one.

Revenue: energy heavy. Market cap: tech-heavy.

And as JoMoney has pointed out, you can't really compare a publicly traded US company with a Chinese state-owned one.

lazyday
Posts: 3015
Joined: Wed Mar 14, 2007 10:27 pm

Re: World’s Largest Companies - Revenue vs. Market Cap

Post by lazyday » Thu Aug 10, 2017 11:56 am

Tamales wrote:Has there ever been a period in recent history (say 30 years?) where the 10 largest by market cap was not dominated by US firms? (I don't know; just asking)
January 1990 was only a little after the peak of the Japanese market. Would be interesting to see the list from then.

(I'd be a little surprised if US had less than half)

User avatar
SimpleGift
Posts: 2653
Joined: Tue Feb 08, 2011 3:45 pm
Location: Central Oregon

Re: World’s Largest Companies - Revenue vs. Market Cap

Post by SimpleGift » Thu Aug 10, 2017 12:14 pm

Granted, ranking companies by revenues is not that all that helpful to investors, who are more interested in earnings-per-share and similar metrics. But the annual Global 500 list does give some regional insight into where global revenues are being generated over time (chart below):
  • Image
    NOTE: The Global 500 companies are ranked by revenue, not market cap.
    Source: Fortune
For example, the representation of Chinese companies on the Global 500 list has grown more than five-fold in just the last decade, at the expense of most other developed countries. How much of this remarkable revenue growth in China investors will ever be able to capitalize on — due to market restriction, free float and share dilution issues — remains to be seen.
Cordially, Todd

Post Reply