Which company has the most valuable customers?

11th Apr '18 by Howard Marx

3 comments 2929 reads

I've been thinking about different approaches to valuation. Customer bases for example have wildly different values. Three UK companies:

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ASOS (y/e Aug 2017)
Sales £1.9bn
PBT £80m
Active customers 16.5m

ASOS annual PBT/customer £5

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Tesco (y/e Feb 2018)

Sales £51bn
PBT £1.3bn
Active customers 40m (based on 79m shopping trips/week - I've assumed that customers visit twice/week on average)

TSCO annual PBT/customer £33

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CMC Markets (y/e Mar 2018(e))

Sales £185m
PBT £57.5m
Active customers 39K

CMCX annual PBT/customer £1,475

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CMC Markets seemingly have got a licence to print money.

Can you think of any other listed company that has such an elevated profit/customer?

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Vsihv

11th Jul '19

I am not sure it is a fair basis of comparison, much like one wouldn't consider any ratio without industry context, I think the same applies here. That said, on an industry basis when considering over multiple periods, I think it would offer some very valuable insights, especially when assessing a company's moat.

Tesco and Asos are volume business, Fortnum & Mason & Burberry are not - they would clearly have a higher profit per customer but would not have the same customer opportunity (addressable market in MBA speak!).

Further, if you were a b2b, you would likely have a smaller customer base, but stickier and potentially higher profit / customer.

In answer to your question on CMC, Hargreaves Lansdown (LON:HL.) generates £208/customer after tax! Anticipated to be £218 for 2019.
That said the company is quite literally a license to print money, and had it not been for stupid behavioural biases like waiting for it to drop that little bit more, it would have made me a decent wad too!

shipoffrogs

Interesting concept.

But to flip it - is it better to invest in companies with the least valuable customers? Buffett likes companies where there are many customers making small value purchases (that said repeat purchases would be a major component - Washington Post, Coke, American Express, See's Candies etc).

I say we find the company where:
They have lots of customers,
Those customers makes lots of high value repeat purchases,
Those purchases attract a high margin.

Interestingly I was being somewhat facetious there but I see why he has such a large holding in £aapl (services + iPhone together) hit the requirement.
In fact a lot of the mega techs meet this requirement - maybe US tech is not as overvalued as some would have you believe.

Great post - certainly made me think

Which company has the most valuable customers?

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Howard Marx

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