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Nintendo's Stock: Values Keep Rising

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JWeinCom said:



To sum it up, Sony is like a guy who has a really high paying job, but has tons of expenses, owes the bank a lot of money, and has a history of money problems.

Nintendo is like a guy with a decent paying job that has a perfect credit score, has no debt, and has virtually no expenses.

I love using the word decent.  Sorry I don't have much to add but just wanted to point out the word decent.

I even have a decent scale

semi decent, pretty decent, decent

there might be some I've used that are past decent like totally or extremely decent but I usually just say decent at most



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JWeinCom said:
Mnementh said:

Sorry, one factory that works at a pürofit or 20 factories of which some do profit, some currently not. Which is more valuable?

The number of factories is really irrelevant. 

Suppose the one factory is making billions.  10 of the 20 factories are making 10 million a year.  The other 10 are losing 5 million a year.  The one factory is more valuable.

JRPGfan said:

Nintendo stock is overvalued ?

In 2016 wasnt there a thread about how Sony had made more money from "ps plus" than the entirety of Nintendo did that year?

 

http://www.eurogamer.net/articles/2016-04-28-sonys-psn-is-making-more-money-than-all-of-nintendo

 

"During the financial year ending 31st March 2016, Sony's PlayStation Network generated 529.1bn yen in sales.

During the same financial year, the whole of Nintendo pulled in 504.4bn yen in sales.

In terms of operating income, or profit, PlayStation made 88.7bn yen (£538m). Nintendo made 32.8bn yen (£207m)."

 

If sony makes much more revnue & profit than nintendo, why is nintendo stock almost as high? 

Stock markets dont make sense to me at all.

There are a number of factors here...

First and foremost is historical performance.  Nintendo has made profit almost every quarter for its entire life, with a recent three year stretch being the only time they've endured losses.  So, even if 2016 was a poor year for Nintendo and a great year for Sony, that doesn't make them a more valuable company.  It's like if you have a baseball team that crushed its rival in the most recent game, but had lost the previous ten.

Secondly, you have to look at assets, liabilities, and debt.  Sony has a lot of long term debt, which diminishes the future profitability of the company.  In 2016, when PSN was making all that money, a big chunk of it had to go to creditors. If you buy the company, you buy the debt with it.  Nintendo on the other hand has no debt.

Sony also has a ton of short term liabilities.  That's a bit different from debt, as it doesn't necessarily carry interest.  Basically, these are bills that are going to come due in the near future.  Sony has more short term liabilities than it has cash available to pay for them.  So, if Sony has a bad quarter or year, they're going to need to either issue more stock, sell long term assets, or borrow money at interest.  None of those are desirable options.  If Sony has a few consecutive bad years, they could be in real trouble.

Nintendo on the other hand has enough cash on hand to pay whatever bills they have, and would still have billions of dollars to spare.  Nintendo could lose about half a billion dollars for 20 years, and there would be no external pressure on them.

Then, there is future potential.  Sony has their hands in a lot of businesses with iffy futures.  Their movie division is tanking, their phone business has had trouble making any headway against google and android, dedicated cameras are disappearing (Sony makes more money selling camera components for phones), and so on. 

Nintendo is in the same boat to an extent, as the future of dedicated gaming hardware is iffy.  But, Nintendo's most valuable asset is their intellectual property.  Even in a world where dedicated gaming consoles  go the way of the CD player, Mario and Pokemon alone are worth billions.  If Nintendo was forced to leave the hardware business, they could instantly become the most valuable third party developer.




To sum it up, Sony is like a guy who has a really high paying job, but has tons of expenses, owes the bank a lot of money, and has a history of money problems.

Nintendo is like a guy with a decent paying job that has a perfect credit score, has no debt, and has virtually no expenses.

yeah sony can't go third party cause... they live off of being a third party support. if they give up hardware, they give up.

ninty on the other hand... there is a REAOSN why sony fans wanted ninty to go third party, cause even die hard sony fans want a nintendo game or two.

 

well, more accurately, sony is the CEO who earns a lot but also has a lot of debt old and new, though not enough to compromize his high living standerds.

ninty is the division head of a big well off company who also managed to accumilate a big bank account, though he made a mistake in a stock investment recently.



Wyrdness said:
JRPGfan said:

Nintendo stock is overvalued ?

In 2016 wasnt there a thread about how Sony had made more money from "ps plus" than the entirety of Nintendo did that year?

 

http://www.eurogamer.net/articles/2016-04-28-sonys-psn-is-making-more-money-than-all-of-nintendo

 

"During the financial year ending 31st March 2016, Sony's PlayStation Network generated 529.1bn yen in sales.

During the same financial year, the whole of Nintendo pulled in 504.4bn yen in sales.

In terms of operating income, or profit, PlayStation made 88.7bn yen (£538m). Nintendo made 32.8bn yen (£207m)."

 

If sony makes much more revnue & profit than nintendo, why is nintendo stock almost as high? 

Stock markets dont make sense to me at all.

Stock markets move on speculation for future value, last years profits mean nothing for the present and the future, how an investor sees Nintendo now is that they have a new product out that is selling well and will be on the market for 6-7 years, 3DS is still selling, the are still more mobile games to come with the Animal Crossing entry and an online subscription service is launching soon.

Investors want to get on board now so they can make money on the speculated value, as more and more investors jump on the stock the price of it rises.

First of all: the idea Nintendo outdoes Sony in revenue in the near future and on a longkeeping base is bollocks. Secondly: stock is not only valued after profit, but also after value of the company behind. Think of that: if someone buys all stock of Sony and Nintendo and then sells the assets, which brings more? Obviously Sony, because they simply own so much more worldwide. That includes physical assets and intellectual assets (patents, copyrights - not only of games but movies as well).



3DS-FC: 4511-1768-7903 (Mii-Name: Mnementh), Nintendo-Network-ID: Mnementh, Switch: SW-7706-3819-9381 (Mnementh)

my greatest games: 2017, 2018

Predictions: Switch / Switch vs. XB1 in the US / Three Houses first quarter

JWeinCom said:
Mnementh said:

Sorry, one factory that works at a pürofit or 20 factories of which some do profit, some currently not. Which is more valuable?

The number of factories is really irrelevant. 

Suppose the one factory is making billions.  10 of the 20 factories are making 10 million a year.  The other 10 are losing 5 million a year.  The one factory is more valuable.

Sure, the one factory is more valuable as the other ones - each separately. But the value lies not only in profit it makes currently. Because that can change fast. Say, one is making expensive smartphones, the other is making simpler phones in bigger number. The smartphone factory makes more profit. But then a worldwide financial crisis hits, and people have less money to spend. Instantly the factory making the simpler phones becomes more profitable.

Value lies in simple assets. The machines, the workforce, the distribution lines. A factory can be reassigned to assemble another more profitable product with the same machines. While profit certainly is important to check the value, it is by far not the only thing.

And now look, how much assets Sony has worldwide, and how much Nintendo. It is not only factories, it includes also buildings, company cars, even furniture. Then you also have to see the intellectual properties. Look alone at how much more patents Sony has alone in 2017 compared with Nintendo:

http://stks.freshpatents.com/Nintendo-Co-Ltd-nm1.php?archive=2017

http://stks.freshpatents.com/Sony-Corporation-nm1.php?archive=2017

And that's not all. Copyrights own Sony also a lot more. Remember Sony is not only a gaming company, but also does movies.

All these values accounts to something. That makes a company more valuable. Even if Nintendo makes more profit for a year or two - profit is very volatile, it depends on success of a few products in most cases. Look how the future of Apple turned with just one product, the iphone.

Wikipedia has listed Sony with following data:

Revenue: ¥7.6 trillion / Net income: ¥73.3 billion / Total assets: ¥17.66 trillion

https://en.wikipedia.org/wiki/Sony

 

and Nintendo:

Revenue: ¥489.095 billion / Profit: ¥102.574 billion / Total assets: ¥1.469 trillion

https://en.wikipedia.org/wiki/Nintendo

 

For both companies it's from their financial statements for the financial year ending in march 2017.

As you can see, although Nintendo profited more over this year, the value of the assets alone should secure that Sony has a higher value.

Sure, you price in assumptions about the future, but thinking that Nintendo increases their assets tenfold is just bollocks.

And remember, profit is volatile. The base of all profit is revenue, and that is much more higher in Sonys case. That can turn fast into a higher profit.



3DS-FC: 4511-1768-7903 (Mii-Name: Mnementh), Nintendo-Network-ID: Mnementh, Switch: SW-7706-3819-9381 (Mnementh)

my greatest games: 2017, 2018

Predictions: Switch / Switch vs. XB1 in the US / Three Houses first quarter

Mnementh said:

First of all: the idea Nintendo outdoes Sony in revenue in the near future and on a longkeeping base is bollocks. Secondly: stock is not only valued after profit, but also after value of the company behind. Think of that: if someone buys all stock of Sony and Nintendo and then sells the assets, which brings more? Obviously Sony, because they simply own so much more worldwide. That includes physical assets and intellectual assets (patents, copyrights - not only of games but movies as well).

Except Sony has a lot of debt and expenses Nintendo doesn't while having a tonne of cash in hand and that factors heavily into future value, a lot of the money Sony is making is going to pay off these expenses and debts even if you sell off all their assets so you'd get much less returns, you'd get more money out of Nintendo as a result these are aspects of the financial market people fail to realize.

Sony's other business ventures right now are a sink hole for money from their electronics, phones and even the movies are on shakey ground.



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JRPGfan said:

Nintendo stock is overvalued ?

In 2016 wasnt there a thread about how Sony had made more money from "ps plus" than the entirety of Nintendo did that year?

 

http://www.eurogamer.net/articles/2016-04-28-sonys-psn-is-making-more-money-than-all-of-nintendo

 

"During the financial year ending 31st March 2016, Sony's PlayStation Network generated 529.1bn yen in sales.

During the same financial year, the whole of Nintendo pulled in 504.4bn yen in sales.

In terms of operating income, or profit, PlayStation made 88.7bn yen (£538m). Nintendo made 32.8bn yen (£207m)."

 

If sony makes much more revnue & profit than nintendo, why is nintendo stock almost as high? 

Stock markets dont make sense to me at all.

Its almost as though Switch wasnt released earlier this year isnt it....

 



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Link: Shipment History Since 1995


Wyrdness said:
Mnementh said:

First of all: the idea Nintendo outdoes Sony in revenue in the near future and on a longkeeping base is bollocks. Secondly: stock is not only valued after profit, but also after value of the company behind. Think of that: if someone buys all stock of Sony and Nintendo and then sells the assets, which brings more? Obviously Sony, because they simply own so much more worldwide. That includes physical assets and intellectual assets (patents, copyrights - not only of games but movies as well).

Except Sony has a lot of debt and expenses Nintendo doesn't while having a tonne of cash in hand and that factors heavily into future value, a lot of the money Sony is making is going to pay off these expenses and debts even if you sell off all their assets so you'd get much less returns, you'd get more money out of Nintendo as a result these are aspects of the financial market people fail to realize.

Sony's other business ventures right now are a sink hole for money from their electronics, phones and even the movies are on shakey ground.

Look at the numbers, even including debts their assets have more worth than Nintendos.



3DS-FC: 4511-1768-7903 (Mii-Name: Mnementh), Nintendo-Network-ID: Mnementh, Switch: SW-7706-3819-9381 (Mnementh)

my greatest games: 2017, 2018

Predictions: Switch / Switch vs. XB1 in the US / Three Houses first quarter

Mnementh said:
Wyrdness said:

Except Sony has a lot of debt and expenses Nintendo doesn't while having a tonne of cash in hand and that factors heavily into future value, a lot of the money Sony is making is going to pay off these expenses and debts even if you sell off all their assets so you'd get much less returns, you'd get more money out of Nintendo as a result these are aspects of the financial market people fail to realize.

Sony's other business ventures right now are a sink hole for money from their electronics, phones and even the movies are on shakey ground.

Look at the numbers, even including debts their assets have more worth than Nintendos.

So?

A stock price is what a market thinks it is worth.

That will take into account many factors.  Sony is in markets that the stock market doesnt think it should be in and this affects its stock price.  Its no surprise that Sony stock started to climb as soon as they reduced the markets they were playing in, cut costs, cut staff, sold buildings, way before profits started to arrive.   Becuase it showed the company were prepared to actually start planning for once and were prepared to shrink the size of the company.

To prove the point.  If Sony announced they were ditching Playstation tomorrow, their share price would collapse, yet their asstes and liabilities wouldnt have change.

Assets and liabilities have little to do with the current/future stock price.  The market is predicting where they think a company will go, as are buyers and sellers of the stock.

 

 



I'm not really here!

Link: Shipment History Since 1995


Mnementh said:

Look at the numbers, even including debts their assets have more worth than Nintendos.

Yeah and?

That's only one factor in market movements and speculation, all their money solely comes from the PS side of things right now and like Kowenicki mentioned if something went wrong like they have another PS3 early years debacle or PS brand was ditched it would send their value into free fall as unlike Nintendo they haven't always made money consistently and their future would be a massive question.

In the long run investors see more money coming in from Nintendo as even if they were to have a worst case scenario and go third party drop out of gaming the worth of IPs like Mario and Pokemon would still bring in a tonne of money. That's how stock markets work on future value speculation not just pure numbers.



Mnementh said:
JWeinCom said:

The number of factories is really irrelevant. 

Suppose the one factory is making billions.  10 of the 20 factories are making 10 million a year.  The other 10 are losing 5 million a year.  The one factory is more valuable.

Sure, the one factory is more valuable as the other ones - each separately. But the value lies not only in profit it makes currently. Because that can change fast. Say, one is making expensive smartphones, the other is making simpler phones in bigger number. The smartphone factory makes more profit. But then a worldwide financial crisis hits, and people have less money to spend. Instantly the factory making the simpler phones becomes more profitable.

Value lies in simple assets. The machines, the workforce, the distribution lines. A factory can be reassigned to assemble another more profitable product with the same machines. While profit certainly is important to check the value, it is by far not the only thing.

And now look, how much assets Sony has worldwide, and how much Nintendo. It is not only factories, it includes also buildings, company cars, even furniture. Then you also have to see the intellectual properties. Look alone at how much more patents Sony has alone in 2017 compared with Nintendo:

http://stks.freshpatents.com/Nintendo-Co-Ltd-nm1.php?archive=2017

http://stks.freshpatents.com/Sony-Corporation-nm1.php?archive=2017

And that's not all. Copyrights own Sony also a lot more. Remember Sony is not only a gaming company, but also does movies.

All these values accounts to something. That makes a company more valuable. Even if Nintendo makes more profit for a year or two - profit is very volatile, it depends on success of a few products in most cases. Look how the future of Apple turned with just one product, the iphone.

Wikipedia has listed Sony with following data:

Revenue: ¥7.6 trillion / Net income: ¥73.3 billion / Total assets: ¥17.66 trillion

https://en.wikipedia.org/wiki/Sony

 

and Nintendo:

Revenue: ¥489.095 billion / Profit: ¥102.574 billion / Total assets: ¥1.469 trillion

https://en.wikipedia.org/wiki/Nintendo

 

For both companies it's from their financial statements for the financial year ending in march 2017.

As you can see, although Nintendo profited more over this year, the value of the assets alone should secure that Sony has a higher value.

Sure, you price in assumptions about the future, but thinking that Nintendo increases their assets tenfold is just bollocks.

And remember, profit is volatile. The base of all profit is revenue, and that is much more higher in Sonys case. That can turn fast into a higher profit.

There are various methods for determining a company's value.  I've never ever seen anyone (except at this point two people trying to make the argument that Sony is significantly more valuable than Nintendo) base it on assets alone.  Because assets mean nothing on their own.  Assets only have meaning when coupled with liabilities, which combines to form a metric called solvency.

You're pointing out that Sony has more assets.  But that 17.66 trillion in revenue is far less impressive when you consider that Sony has 14.5 trillion yen in liabilities.  Nintendo has 218 billion yen in liabilities, which is basically nothing..  

Nintendo's liabilities are 14% of their assets which is crazy good.  Sony's liabilities are 82% of their assets.  That's firmly on the high side. Once you subtract what Sony owes, they have 3.5 trillion yen in assets.  This is just about double the assets Nintendo possesses, not 10x.  And 1.1 trillion yen of that is intangible things (like goodwill and IP) while Nintendo for some strange reason does not list any intangible assets.  

So, in terms of actual physical assets, Sony has 2.4 trillion yen in excess of their liabilities.  Nintendo has 1.45 trillion. 

You mentioned that the marketplace can be volatile, and indeed it can be.  That's where another metric called liquidity comes in.  Sony has 5.2 trillion yen that they'll have to pay within a year.  They have 4.6 trillion dollars in current assets.  That means their liquidity ratio (current ratio) is .83.  That's very bad.  That means they only have 83% of what they need to pay their bills for the next year.  So, if they have a bad year, they're going to be in trouble.  They'll have to accumulate more long term debt (bad) or sell assets (bad).  Nintendo's liquidity ratio is 6.19.  That means they can pay their short term debts 6 times  over.  That is crazy good.  And then we have long term debt. Sony has a bit over 9 trillion yen in long term debt.  That's a lot relative to the size of the company.  Nintendo has something like 40billion yen in long term debt.  That is practically nothing. 

The bottom line is that it's pretty easy to foresee a scenario where Sony can run into very serious financial problems in the next ten years.  For Nintendo to have any financial problems that would actually threaten the company within the next decade, something really really really crazy would ha ve to happen.  Like, maybe if North Korea nuked Kyoto or something.

The idea that Sony is just going to switch their products to more profitable ones is a fantasy.  We've seen their divisions slumping, and they haven't just switched to other products.  As Sony's divisions have been slumping (media players, TVs, computers, cellphones) we haven't seen them radically change course.  We've seen them either sell off divisions, or try and keep competing with generally poor results.  Because changing quickly, especially in an incredibly competitive market like electronics, is prohibitively expensive.  It's a last resort if anything, and it's not something that most people are going to consider in long term projections.  

And by the way, Sony really just doesn't have that much in the way of factories and plants and land anyway.  Their assets are mostly contained in investments.  Honestly, that's probably better than Nintendo who basically keeps their money in a jar under their bed, but if your argument is based on physical assets like that, it's a weak one.

Onto profit then.  You're right that having more profit in a year or two doesn't mean a company is more valuable.  But, in the past decade, the amount of money made by Nintendo completely dwarfs the amount made by Sony.  Nintendo's made somewhere in the vicinity of 9 billion dollars over that timeframe, and Sony is I'm fairly certain has lost money in that period.  









TL:DR-  Yes, Sony has more assets and typically generates more revenue.  But there is a reason that there are all of those other numbers on the balance sheet.  Because all of those (especially the liabilities part) also factor into a company's prospects.  The only way to come to the conclusion that Sony is significantly more valuable than Nintendo is to, as you did, literally ignore more than half of the balance sheet.

Sony's assets and revenues show that they are a big company, which is the only reason they're even in the same ballpark as Nintendo's value. But those are the only areas where they beat Nintendo.  In terms of financial health, solvency, liquidity, historical profitability, and so on, Nintendo crushes them.  Sony could potentially, if all their divisions had major hits, make more money than Nintendo could, by a huge factor.  But, if the few areas that are functioning well (camera sensors, financials, playstation) falter, then Sony can realistically face an existential crisis in the near future.  And if nothing major happens, Nintendo will be a more profitable company in the near future.