I heard about this ratio when I was hearing a presentation from a small telecom company a long time ago, and they were comparing themselves to AT&T (T). The small telecom said that the company was generating thousands of dollars more in revenue per employee and therefore more productive than the big blue chip telecom. It's an interesting concept that can be used to compare stocks.
If you look at the technology sector, you can see some interesting comparisons. Here are some examples:
|Advanced Micro Devices||(AMD)||$551,776|
You would normally think that manufacturing companies would naturally have a lower Sales per Employee ratio that software or Internet company. Hewlett-Packard (HPQ) is a perfect example, which is one of the lowest on the list. However, Apple (AAPL) which is primarily a manufacturing company is at the top of the list. Cisco (CSCO), which is also in manufacturing is near the top.
Software you would expect to see higher on the list, such as Microsoft (MSFT), which is number 4. However, Oracle (ORCL), which is also a software company is at the bottom of the list.
What about returns? If you look at the top two, Apple is up 50.9% over the last 12 months, and Facebook is up 93.0%. If you look at the bottom two, Hewlett-Packard is up only 37.0% and Oracle is up only 22.5%. Maybe the Sales per employee ratio warrants a closer look.
If you like interesting stock lists like this, check out WallStreetNewsNetwork.com.
Disclosure: Author owns AAPL, MSFT, AMZN, YHOO, EBAY, INTC