The Farmville herald and farmer-leader. (Farmville, Va.) 1934-1957, 1957-01-01


During my summer vacation at
Gloucester, Mass. I read about
forty 1855 annual reports Of corpora
tons listed on the New York Elk
change. I was especially pleased
with some of these because they
had been made very interesting. IL
Illustrated by attractive pictures and
charts. | assume that these latter
have been prepared by professional
advertising agencies and public re
lations men. | am very pleased to
see so many Of them with the date
of the year in large type in the
upper right-hand corner on the out
side cover
Price Relation to Net Earnings
The common "quickie rule" for
brokers to use in looking at annual
reports is to study the relation Of
price to net earnings. When the
price is 80 to 40 times earnings, it
is usually a sign that the price is
too high: while if the price is only
five times net earnings after fair
depreciation and taxes, it is looked
upon as attractive. | like to keep
within the range OF 10-to-20 times
earnings.
Mixed-Up Figures
Some Of the reports were UNI
consciously misleading. For in
stance, some would include the sale
of land or securities with the gross
income, which, of course, should not
have been done Furthermore, de-
probation or ''Writeoff' has been
handled differently by different
companies. This depreciation figure
is very important to study for two
reasons: First. heavy depreciation
can reduce the net earnings to less
than they really are, while small
depreciation can indicate the re
verse If not honestly treated. Sec
ond, under ordinary circumstances
the government allows an average
Of about five per cent on deprecia
ton. but on special military worl
Is per cent is sometimes allowed
Oil companies have the larges
write-offs. My two favorites arr
. Continental Oil and Phillips Petrol
cum. Standard Oil Of California als'
rates well, with over 10 per cen
write-offs each year. The chemlca
companies also have a good recort
for write-offs, leading with D b v
Chemical at 10 per cent and Mon
santo Chemical at nearly nine pc
cent. Union Carbide also has a nin'
per cent write~off
u. S. Steel Leads Write-0ffs
Upon studying the annual report
of the six leading steel companies
; it was evident that u S. Steel LEI
with write-off Of seven per cent
although National Steel followet
: closely with SIS per cent. The loves
in my list was Inland Steel. Whicl
showed only 80 per cent. On re
placement basis, probably u S
Steel would amount to 5000 to $50
a share while today it Is selling a
ST.. Bethlehem Steel. its neares
competitor, writes off less than fiv
per cent.
Other reports were on aluminium
land nickel companies. together will
the three leading copper companies
namely Anaconda Company, Ken
colt Copper, and Phelps Dodge
The aluminium companies-encou
aged by special government con
cessions- lead. with write-offs 0
over seven per cent Anaconda
International Nickel has oot
write-off, but readers who purchase
this stock should have the certifi
Gates stand in the name Of some
u. S. bank or stock exchange firm
and not in their own names Other
wise; such stock is quite embar
RAISING in the case Of the death 0
an individual
The write-offs OF miscellaneou!
companies range from about Is pc
cent for International Business Ma
chimes down to less than two pc
cent for several Of the companies
One of my favorite stocks, Westing
house Electric. has a write-off o
three per cent. The smallest write
offs are in retail trade companies
due largely to the fact that they
lease most Of their stores. F w
Woolworth has the largest write-of
of two per cent, while both Sears