TIME Companies

There Are America’s Best Run Companies

Southwest Airlines jets parked at Baltimore Washington International Airport in Baltimore, Md.
Southwest Airlines jets parked at Baltimore Washington International Airport in Baltimore, Maryland. Charles Dharapak—AP

The list was compiled based on three key measures in the past year: earnings per share, revenue and share price

This post is in partnership with 24/7 Wall Street. The article below was originally published on 247WallSt.com.

The stocks of many public companies have soared in the past year, even with a larger number of them posting only mediocre financial results. The overall market improvement has been that strong. However, some companies were able to shine above the rest, both in terms of stock prices and financial results, which puts them into a very exclusive category.

24/7 Wall St. picked eight companies as the best run in America because they had extraordinary numbers based on three key measures in the past year: earnings per share, revenue and share price. To be considered for the list, companies ultimately also had to convince investors that they had very bright futures. The eight companies highlighted here have track records of seizing opportunities, excelling in their industries and outperforming the expectations set by investors.

While the U.S. stock market has enjoyed a rally in the past five years, the best run companies reviewed by 24/7 Wall St. greatly exceeded the S&P 500’s 86.4% increase. Under Armour Inc. is the most notable example as its shares soared more than 900% over the period. The share prices of O’Reilly Automotive Inc. and Southwest Airlines Co. have had share price results nearly as good during the past five years, up 410% and 290%, respectively.

Some of the best-managed companies have capitalized on key opportunities and are now reaping the benefits. For example, Lam Research Corp. positioned itself as a leader in producing machinery for semiconductor manufacturers, especially memory chip makers, at a time when such manufacturers have been ramping up capital spending. Another example is O’Reilly, which has expanded its store footprint and retail infrastructure to efficiently meet the growing demand of the do-it-yourself car repair market, as well as the commercial auto repair one.

In other instances, companies have calmed investors’ concerns and beat their expectations. Facebook Inc. is one of the strongest examples of this. The social network has defied skepticism about its ability to make money on mobile ad sales, and such sales now account for about 66% of its revenue.

A few companies have succeeded by offering best-in-class products and services. Marriott International Inc. is extremely popular with franchisees looking to operate a hotel, a key advantage in its industry.

Edwards Lifesciences Corp. rolled out in the United States its Sapien XT transcatheter aortic valve replacement, which is used in patients who cannot undergo open-heart surgery. Sapien XT outperformed a similar product produced by competitor Medtronic, according to a study published in the Journal of the American Medical Association.

Many of these companies still have significant challenges ahead. In some cases, they must justify their very high valuations. Facebook trades at more than 41 times expected 2015 earnings and Under Armour at nearly 56 times forward earnings. Edwards must clear Food and Drug Administration hurdles to bring its next product, Sapien 3, to market in time to satisfy Wall Street. And Southwest Airlines and Marriott remain especially sensitive to unexpected changes in the U.S. economy, which affect how often people travel.

In order to determine America’s best run companies, 24/7 Wall St. reviewed all S&P 500 stocks that rose in the past year. We then screened for companies where the trailing 12-month revenue and diluted earnings per share had grown from the year before. 24/7 Wall St. editors then reviewed this list to find those companies that had capitalized on major opportunities to expand, that made operational choices that could drive their future performance over a multiyear period or that have proven themselves as clear market leaders. Figures on revenue and diluted EPS, as well as industry classifications, are from S&P Capital IQ. One-year share price data, also from CapIQ, is as of December 22, 2014. Marriott International’s revenues include cost reimbursements.

These are America’s best run companies.

1. Southwest Airlines Co.
> Industry: Airlines
> Revenue (last 12 months): $18.4 billion
> 1-year share price change: 118.8%

Southwest Airlines had an incredibly strong year in 2014. The airline reaped the benefits of a commitment to domestic flights and of a revenue strategy that did not depend on baggage fees. Although it is a now-common industry practice, Southwest believed baggage fees would undermine its ability to appeal to consumers. Also, Southwest was able to add major routes from its home airport, Dallas Love Field, after the repeal of the Wright Amendment, which limited flights from its hub to just nine states.

Some of Southwest’s strong performances can be attributed to overall positive industry trends: fuel costs have declined; the U.S. economy has improved; industry consolidation has allowed airlines to pack planes more efficiently; and passengers flew more last year than they did in 2013. Moreover, Southwest has outperformed where it matters most — profitability. On a trailing 12 month basis, the airline’s operating margins were better than those of the three national legacy carriers: American Airlines, United Continental, and Delta Air Lines.

2. Edwards Lifesciences
> Industry: Healthcare equipment
> Revenue (last 12 months): $2.2 billion
> 1-year share price change: 103.2%

For heart valve maker Edwards Lifesciences, 2014 was a banner year, as its share price more-than doubled. The company received approval from the Food and Drug Administration in June to release its newest device, Sapien XT, a transcatheter aortic valve replacement (TAVR) device. For many high-risk patients, the less invasive TAVR procedure is more suitable than open heart surgery. In the first nine months of 2014, Edwards’ sales of transcatheter heart valves rose by 29%, driven by the launch of the Sapien XT in the U.S. and Japan, as well as by the release of the newer Sapien 3 in Europe.

According to J.P. Morgan, “Over the last half dozen years, Edwards has led the development of the transcatheter valve market – first in Europe, then the US, and now in Japan.” A recent study published in The Journal of the American Medical Association found that the Sapien XT was more likely to be successfully implanted compared to a rival product from Medtronic.

3. Marriott International
> Industry: Hotels, resorts, and cruise lines
> Revenue (last 12 months): $13.5 billion
> 1-year share price change: 62.9%

Marriott International shares rose substantially in 2014 on the back of an extremely strong year for the company. In the third quarter of 2014, Marriott’s occupancy rate and average daily rate per room were both well above the prior year’s figures. This led to a 9.4% year-over-year increase in revenue per available room (RevPAR), extending a multi-year growth trend following a massive decline in RevPAR during the Great Recession. Higher revenues have also driven up profits. Through September, diluted earnings per share were up more than 23% in 2014 from the year before.

According to a recent report from Barclay’s, Marriott is among the leading hotel chains in adding new units. Barclay’s also noted that both franchisees and lenders prefer Marriott to most other hotel franchisors. The majority of hotels operating under one of Marriott’s brands are franchised.

For the rest of the list, please go to 24/7WallStreet.com.

TIME Companies

Why Microsoft Is Making Less Money From Windows

Microsoft Unveils Windows 8
People walk past a display at a press conference unveiling the Microsoft Windows 8 operating system on October 25, 2012 in New York City. Mario Tama—Getty Images

Sluggish PC sales are partially to blame, but there's more to this story

Microsoft’s second quarter earnings report released Monday had a few bright spots, including rising sales in mobile devices and cloud services. Overall, the company’s sales were up 8% in the quarter ending Dec. 31, though costs related to acquisitions and layoffs meant profits were down 10.6% to $5.9 billion.

Despite the company’s good sales numbers, revenue from copies of its Windows operating system installed on new computers, long a reliable source of cash, were down 13% year-over-year. Why?

First, the consumer PC market has been either slipping or stagnant for years, meaning there’s fewer devices capable of running Microsoft’s PC operating system being sold.

But there’s another reason that’s far more under Microsoft’s control.

Back at the end of 2013, Microsoft was on the verge of ending technical support for Windows XP business customers. That convinced lots of IT and accounting departments it was finally time to upgrade from the decade-plus-old operating system, driving sales of Microsoft’s newer OSes, like Windows 8.

However, that XP end-of-life phenomenon wasn’t around to drive sales last year, helping explain Windows’ poor year-over-year numbers. (Microsoft also said cheaper copies of Windows it sold to academic buyers cut into the category’s revenue).

It’s safe to expect Windows to be less of a moneymaker for Microsoft in the future. Last week, the company announced that its upcoming iteration of the operating system, Windows 10, will be a free upgrade for users with older versions already installed. That’s a consumer-friendly move that should help drive adoption rates, but it will eat even further into Windows’ revenue figures. Still, if Microsoft continues to be successful in mobile and cloud services, that could more than make up for the free upgrade.

(Read next: Microsoft’s profits dip despite strong phone sales)

TIME Fast Food

McDonald’s CEO Pleads for Time to Turn Things Around

A sign stands outside of a McDonald's restaurant in San Francisco.
A sign stands outside of a McDonald's restaurant in San Francisco. Justin Sullivan—Getty Images

Many changes are to come for the fast food giant

The only good thing about 2014 for McDonald’s is that it’s finally over.

As Fortune detailed in November, this has been a terrible, horrible, no good, very bad year for the iconic fast food giant. Today the company capped it off by reporting fourth-quarter and full-year results that made 2014 the first year since 2002 in which it reported a decline in global same-store sales.

The year was historically bad for McDonald’s U.S. business in particular. Nation’s Restaurant News reported last week that the company’s slump in the U.S. market would be the first time its numbers waned compared to the year before in at least 30 years, ending the longest run ever of domestic restaurant sales growth for a single chain.

On the earnings call today CEO Don Thompson cited a litany of actions the company is taking to turn things around, including localizing its menu, allowing patrons to customize their burgers, and launching fresh marketing. He stressed that McDonald’s is “acting with a sense of urgency”—but he also made the case for giving management more time for a turnaround to kick in. He noted that McDonald’s is only six months into the 12- to 18-month plan he outlined in July.

“History tells us that these efforts will take time to resonate,” Thompson said on the call, “[and therefore] expect continued volatility in the market through most of 2015.” As he put it, “2015 will be a year of regaining momentum globally…. It will take time, especially in larger markets to notice the comprehensive changes that are under way.” He warned that the company would continue to feel pressure on sales and earnings in the first half of the year, with negative same store sales already expected for January.

Thompson certainly inherited some of the company’s issues, such as menu bloat, which had been a long time in the making when he became CEO in July 2012. Thompson had to report a slowdown in sales growth in most major markets his very first quarter on the job, but he’s now had two and a half years to change the company’s trajectory and the arrows keep pointing the wrong direction.

One promising sign, perhaps, came from a subtle shift in what McDonald’s said about food quality—a sensitive issue for the company. McDonald’s management has always maintained that its food is excellent, arguing that it was a simply a perception problem; the company, it said, just needed to do a better job educating consumers about its ingredients and how they’re prepared. But this time Mike Andres, president of the U.S. business, acknowledged on the call that “we have to make sure our quality aligns with consumers’ definition of quality moving forward. And so we’re going to be very agressive in that area.” He said that he’s building culinary talent and bringing in outside consultants to help with “menu vision.”

It was an important acknowledgement. But the company’s challenge remains daunting. It needs to simultaneously pare its menu, improve its offerings, increase its speed, and hone its message—a combination of factors that will be hard to pull off, particularly in a world where many customers are craving healthier offerings.

This article originally appeared on Fortune.com.

TIME Companies

Apple, Facebook, Google and More: Get Ready for Earnings Season

Apple Unveils iPhone 6
Apple CEO Tim Cook shows off the new iPhone 6 and the Apple Watch during an Apple special event at the Flint Center for the Performing Arts on September 9, 2014 in Cupertino, California. Justin Sullivan—Getty Images

Intel beat expectations. What else does earnings season have in store?

So which will it be? Another banner year for tech stocks, or a period of disappointment? The next couple of weeks will provide investors plenty of clues.

Technology stocks in general enjoyed a good 2014, but the first couple of weeks of the new year have brought a sense of uncertainty. Now, as many companies in the sector gear up for the quarterly ritual of earnings announcements, investors will be scouring numbers for any signs to dispel uncertainty.

Analysts are expecting all earnings in the S&P 500 to rise a mere 1.1% in the quarter, according to Factset. For tech stocks, the growth will be slightly better: up 2.3%. Tech companies themselves aren’t feeling terribly confident: Of the 24 tech companies in the S&P 500 that have offered earnings guidance to investors, only four have given positive guidance, while 20 are taking a more cautious stance.

Factset was forecasting 4% growth in tech earnings and 8% growth for all S&P 500 sectors just a few months ago. But that was before oil prices started to plunge and the economic situation in Europe and Asia started looking as sketchy as it does now. That all adds up to uncertainty, and people tend to brace for bad news when they don’t know what to expect.

However, tech can be a safe haven in bad economic times, as it proved to be fairly resilient during the 2008-09 recession. And with investors’ expectations already lowered, strong earnings in tech could spark a more widespread rally.

The first tech giant to report was Intel. It’s an important company to watch because chipmakers’ orders rely on other tech companies’ plans for growth, making them industry bellwethers.

Intel was an under-performer for years while PC sales were in decline, but that market has finally stabilized after years in freefall. Accordingly, Intel handily beat expectations Thursday, posting Q4 2014 earnings of 74 cents per share, up 39% year-over-year, on $14.72 billion in revenue. Outside the consumer PC market, Intel has been making inroads on chips for mobile devices and sensors powering the Internet of Things, while the growth of cloud computing is creating more demand for its servers.

“The fourth quarter was a strong finish to a record year,” said Intel CEO Brian Krzanich in a statement. “We met or exceeded several important goals: reinvigorated the PC business, grew the Data Center business, established a footprint in tablets, and drove growth and innovation in new areas.”

However, Intel’s Q1 2015 guidance was lighter than expected, sending its stock down about 2% in after-hours trading. That post-earnings decline isn’t good news for other tech companies, because it suggests investors want more than just good news — they want the kind of great news that’ll spark a bigger rally.

The next notable tech names will report on Tuesday, when IBM and Netflix share their financials. This week, three analysts cut their earnings estimates and price target for IBM, following a report in the Register that said the enterprise IT giant is on the verge of its biggest restructuring ever.

Any news on a restructuring will reshape how investors assess IBM’s long-term prospects. But Big Blue’s earnings report may also offer insight on how demand and competition are faring in the enterprise tech market. If IBM’s challenges reflect an industry-wide slowdown, or if its results suffer significantly from the strength of the U.S. dollar, it could signal problems for other multinational enterprise tech stocks.

Meanwhile, Netflix’ earnings could add yet another volatile chapter in that company’s history. Netflix’s stock plummeted 25% last quarter on sluggish subscriber growth. Next week’s earnings could be just as tumultuous: One analyst said the stock could drop 15%, but urged investors to buy anyway because its international growth and original content are looking stronger than ever. To Netflix investors, such wild swings are nothing new.

Tech earnings will heat up in the final week of January when five of the most closely watched tech companies are all slated to report: Microsoft on Jan. 26, Apple on Jan. 27, Amazon and Facebook on Jan. 28, and Google on Jan. 29. Investors will scrutinize each company for different reasons, yet each will add up to a clearer picture of the health of the tech sector.

Some analysts have been increasing their estimates for Apple and Amazon. Not only is Apple valued attractively after several years as a lagging stock, iPhone sales were strong in the holiday quarter. One analyst says the company could vow to return $202 billion in dividends and buybacks in the next two years. Amazon, meanwhile, could pull back on spending, reversing its recent net losses.

For other tech giants, this quarter may show how they are maturing beyond their core markets: Google in search and Facebook in its mobile-feed ads. All are global companies, so the strong dollar could blunt any international growth. But all are consumer-focused, so they may benefit from the extra spending money consumers have left over from falling energy prices.

Public companies disdain the quarterly earnings process, with the open questionings and the swings in stock prices they can bring. But they also offer each other, their customers and shareholders insight into how the industry at large is faring. We got our first peak Thursday, but there’s plenty more to come.

TIME Careers & Workplace

Here’s How You Can Make One Million Dollars

one-hundred-dollar-bills-stacked
Getty Images

These steps are neither fast nor easy. But they're more likely to work than the quick and easy path

Inc. logo

This post is in partnership with Inc., which offers useful advice, resources and insights to entrepreneurs and business owners. The article below was originally published at Inc.com.

Say you want to become a millionaire. Or a multimillionaire.

Or hey, even a billionaire. (Why not?)

The goal is clear…but the path can be anything but.

But not to Dharmesh Shah, co-founder of HubSpot (No. 1,100 on the 2014 Inc. 5000 and a company that recently went public). Dharmesh sees a clear, if slow and difficult, path to becoming a millionaire–or to reaching whatever level of financial success you aspire to.

Here’s Dharmesh:

Money of course isn’t everything. Not by a long shot. Where your definition of success is concerned, money may rank far down the list. Everyone’s definition of “success” is different.

Here’s my definition: Success is making the people that believed in you look brilliant.

For me, money doesn’t matter all that much, but I’ll confess it did at one time (probably because I didn’t have very much).

So let’s say money is on your list. And let’s say, like millions of other people, that you’d like to be a millionaire. What kinds of things should you do to increase your chances of joining the millionaire’s club?

Here are the steps I’d suggest. They’re neither fast nor easy. But they’re more likely to work than the quick and easy path.

1. Stop obsessing about money

While it sounds counterintuitive, maintaining a laser-like focus on how much you make distracts you from doing the things that truly contribute to building and growing wealth.

So shift your perspective. See money not as the primary goal but as a byproduct of doing the right things.

2. Start tracking how many people you help, even if in a very small way

The most successful people I know—both financially and in other ways—are shockingly helpful. They’re incredibly good at understanding other people and helping them achieve their goals. They know their success is ultimately based on the success of the people around them.

So they work hard to make other people successful: their employees, their customers, their vendors and suppliers…because they know, if they can do that, then their own success will surely follow.

And they will have built a business—or a career—they can be truly proud of.

3. Stop thinking about making a million dollars and start thinking about serving a million people

When you only have a few customers and your goal is to make a lot of money, you’re incented to find ways to wring every last dollar out of those customers.

But when you find a way to serve a million people, many other benefits follow. The effect of word of mouth is greatly magnified. The feedback you receive is exponentially greater—and so are your opportunities to improve your products and services. You get to hire more employees and benefit from their experience, their skills, and their overall awesomeness.

And in time, your business becomes something you never dreamed of—because your customers and your employees have taken you to places you couldn’t even imagine.

Serve a million people—and serve them incredibly well—and the money will follow.

4. See making money as a way to make more things

Generally speaking, there are two types of people.

One makes things because they want to make money; the more things they make, the more money they make. What they make doesn’t really matter that much to them–they’ll make anything as long as it pays.

The other wants to make money because it allows them to make more things. They want to improve their product. They want to extend their line. They want to create another book, another song, another movie. They love what they make and they see making money as a way to do even more of what they love. They dream of building a company that makes the best things possible…and making money is the way to fuel that dream and build that company they love.

While it is certainly possible to find that one product that everyone wants and grow rich by selling that product, most successful businesses evolve and grow and, as they make money, reinvest that money in a relentless pursuit of excellence.

“We don’t make movies to make money, we make money to make more movies.” — Walt Disney

5. Do one thing better

Pick one thing you’re already better at than most people. Just. One. Thing. Become maniacally focused at doing that one thing. Work. Train. Learn. Practice. Evaluate. Refine. Be ruthlessly self-critical, not in a masochistic way but to ensure you continue to work to improve every aspect of that one thing.

Financially successful people do at least one thing better than just about everyone around them. (Of course it helps if you pick something to be great at that the world also values—and will pay for.)

Excellence is its own reward, but excellence also commands higher pay—and greater respect, greater feelings of self-worth, greater fulfillment, a greater sense of achievement…all of which make you rich in non-monetary terms.

Win-win.

6. Make a list of the world’s 10 best people at that one thing

How did you pick those 10? How did you determine who was the best? How did you measure their success?

Use those criteria to track your own progress towards becoming the best.

If you’re an author, it could be Amazon rankings. If you’re a musician, it could be iTunes downloads. If you’re a programmer, it could be the number of people that use your software. If you’re a leader, it could be the number of people you train and develop who move on to bigger and better things. If you’re an online retailer, it could be purchases per visitor, or on-time shipping, or conversion rate…

Don’t just admire successful people. Take a close look at what makes them successful. Then use those criteria to help create your own measures of success. And then…

7. Consistently track your progress

We tend to become what we measure, so track your progress at least once a week against your key measures.

Maybe you’ll measure how many people you’ve helped. Maybe you’ll measure how many customers you’ve served. Maybe you’ll evaluate the key steps on your journey to becoming the world’s best at one thing.

Maybe it’s a combination of those things, and more.

8. Build routines that ensure progress

Never forget that achieving a goal is based on creating routines. Say you want to write a 200-page book. That’s your goal. Your system to achieve that goal could be to write four pages a day; that’s your routine. Wishing and hoping won’t get you to a finished manuscript, but sticking faithfully to your routine ensures you reach your goal.

Or say you want to land 100 new customers through inbound marketing. That’s your goal; your routine is to create new content, new videos, new podcasts, new white papers, etc., on whatever schedule you set. Stick to that routine and meet your deadlines, and if your content is great, you will land those new customers.

Wishing and hoping won’t get you there—sticking faithfully to your routine will.

Set goals, create routines that support those goals, and then ruthlessly track your progress. Fix what doesn’t work. Improve and repeat what does work. Refine and revise and adapt and work hard every day to be better than you were yesterday.

Soon you’ll be good. Then you’ll be great. And one day you’ll be world-class.

And then, probably without even noticing, you’ll also be a millionaire. You know, if you like that sort of thing.

TIME Washington

Growers Struggle With Glut of Legal Pot in Washington State

Too Much Pot
Ashley Green trims a marijuana flower at the Pioneer Nuggets marijuana-growing facility in Arlington, Wash., on Jan. 13, 2015 Elaine Thompson—AP

The legal pot market isn't flying as high as growers had hoped

(SEATTLE) — Washington’s legal marijuana market opened last summer to a dearth of weed. Some stores periodically closed because they didn’t have pot to sell. Prices were through the roof.

Six months later, the equation has flipped, bringing serious growing pains to the new industry.

A big harvest of sun-grown marijuana from eastern Washington last fall flooded the market. Prices are starting to come down in the state’s licensed pot shops, but due to the glut, growers are — surprisingly — struggling to sell their marijuana. Some are already worried about going belly-up, finding it tougher than expected to make a living in legal weed.

“It’s an economic nightmare,” says Andrew Seitz, general manager at Dutch Brothers Farms in Seattle.

State data show that licensed growers had harvested 31,000 pounds of bud as of Thursday, but Washington’s relatively few legal pot shops have sold less than one-fifth of that. Many of the state’s marijuana users have stuck with the untaxed or much-lesser-taxed pot they get from black market dealers or unregulated medical dispensaries — limiting how quickly product moves off the shelves of legal stores.

“Every grower I know has got surplus inventory and they’re concerned about it,” said Scott Masengill, who has sold half of the 280 pounds he harvested from his pot farm in central Washington. “I don’t know anybody getting rich.”

Officials at the state Liquor Control Board, which regulates marijuana, aren’t terribly concerned.

So far, there are about 270 licensed growers in Washington — but only about 85 open stores for them to sell to. That’s partly due to a slow, difficult licensing process; retail applicants who haven’t been ready to open; and pot business bans in many cities and counties.

The board’s legal pot project manager, Randy Simmons, says he hopes about 100 more stores will open in the next few months, providing additional outlets for the weed that’s been harvested. Washington is always likely to have a glut of marijuana after the outdoor crop comes in each fall, he suggested, as the outdoor growers typically harvest one big crop which they continue to sell throughout the year.

Weed is still pricey at the state’s pot shops — often in the $23-to-$25-per-gram range. That’s about twice the cost at medical dispensaries, but cheaper than it was a few months ago.

Simmons said he expects pot prices to keep fluctuating for the next year and a half: “It’s the volatility of a new marketplace.”

Colorado, the only other state with legal marijuana sales, has a differently structured industry. Regulators have kept a lid on production, though those limits were loosened last fall as part of a planned expansion of the market. Colorado growers still have to prove legal demand for their product, a regulatory curb aimed at preventing excess weed from spilling to other states. The result has been more demand than supply.

In Washington, many growers have unrealistic expectations about how quickly they should be able to recoup their initial investments, Simmons said. And some of the growers complaining about the low prices they’re getting now also gouged the new stores amid shortages last summer.

Those include Seitz, who sold his first crop — 22 pounds — for just under $21 per gram: nearly $230,000 before his hefty $57,000 tax bill. He’s about to harvest his second crop, but this time he expects to get just $4 per gram, when he has big bills to pay.

“We’re running out of money,” he said. “We need to make sales this month to stay operational, and we’re going to be selling at losses.”

Because of the high taxes on Washington’s legal pot, Seitz says stores can never compete with the black market while paying growers sustainable prices.

He and other growers say it’s been a mistake for the state to license so much production while the rollout of legal stores has lagged.

“If it’s a natural bump from the outdoor harvest, that’s one thing,” said Jeremy Moberg, who is sitting on 1,500 pounds of unsold marijuana at his CannaSol Farms in north-central Washington. “If it’s institutionally creating oversupply … that’s a problem.”

Some retailers have been marking up the wholesale price three-fold or more — a practice that has some growers wondering if certain stores aren’t cleaning up as they struggle.

“I got retailers beating me down to sell for black-market prices,” said Fitz Couhig, owner of Pioneer Production and Processing in Arlington.

But two of the top-selling stores in Seattle — Uncle Ike’s and Cannabis City — insist that because of their tax obligations and low demand for high-priced pot, they’re not making any money either, despite each having sales of more than $600,000 per month.

Aaron Varney, a director at Dockside Cannabis, a retail shop in the Seattle suburb of Shoreline, said stores that exploit growers now could get bitten in the long run.

“Right now, the numbers will say that we’re in the driver’s seat,” he said. “But that can change. We’re looking to establish good relationships with the growers we’re dealing with.”

MONEY Food & Drink

Chipotle CEO Freely Admits He’s Unsure About the Company’s Future

A restaurant worker fills an order at a Chipotle restaurant in Miami, Florida.
Joe Raedle—Getty Images

And that's great news for investors.

When Chipotle Mexican Grill CHIPOTLE MEXICAN GRILL INC. CMG -0.2654% released third-quarter results in October, the numbers were awe-inspiring.

Revenue jumped 31.1% year over year to $1.08 billion, helped by an amazing 19.8% increase in comparable-restaurant sales. Meanwhile, restaurant level operating margin climbed by 200 basis points to 28.8%, cash generated from operating activities rose 41.4% to $549.8 million, and net income increased a whopping 56.9% to $130.8 million.

However, the market was much less enthusiastic about Chipotle’s guidance, driving shares down 7% after the burrito maker called for 2015 comparable-restaurant sales to increase in the low- to mid-single digit range. During the subsequent conference call, analysts unsurprisingly grilled Chipotle management on exactly how they reached that range. After all, it seemed especially conservative considering Chipotle’s Q3 performance had just capped a six-quarter streak of accelerating comps growth.

Chipotle doesn’t have a clue

Here’s how Chipotle Chairman and co-CEO Steve Ells responded:

We don’t spend a lot of time trying to predict how we are going to leap over that number. What we do is, we take our current sales trends and we literally just push them out over the next 14 months — for the rest of this year and then for all of 2015. … This is the way we have always predicted comps. … [W]e really don’t have a magic approach or a crystal ball to predict how you are going to exceed like a 19% comp, for example.

Translation? Chipotle is happily ignorant when it comes to determining precisely what future comps will be. The company simply extrapolate sales trends out, as it always has, to get a rough ballpark figure of what the coming year might look like.

Why this is a great thing

And to be honest, though that might seem unsettling, I think Chipotle investors should be perfectly happy with this approach for two reasons.

First, though it’s true comps give us an idea of how effectively Chipotle is drawing in new customers and keeping them coming back for more, it’s far from a perfect metric to gauge the long-term prospects of the business. Comps tend to naturally ebb and flow with irregular events like price increases, as well as difficult (or easy) year-over-year comparisons. In the end, I’m relatively unconcerned that Chipotle’s not-so-scientific approach at modeling comps predicts it may finally decelerate growth from 19.8% — which, by the way, was its best result since going public in 2006.

On the other hand, I suppose near-term disappointments with comparable-store sales do create buying windows for opportunistic investors.

Second, note Chipotle is focusing on what really matters instead. Ells elaborated:

We are constantly working on improving our customer experience, we are constantly working on improving our people culture, and we are constantly looking to upgrade the quality of our ingredients. … So we are constantly working on the things that will enhance the dining experience. And over the years it has paid off, so that when we do a good job, when we have great teams, and when they do a good job of providing a great dining experience, customers want to come back to Chipotle more often.

Notice nowhere in that comment were actual comps mentioned. Rather, Ells has a singular focus on improving the Chipotle experience for customers, from fostering its amiable culture all the way down to improving the quality of its already excellent food.

In short, he’s thinking about Chipotle Mexican Grill not just as a stock ticker or piece of paper, but rather as the living, thriving, growing business it truly is. From an investor’s standpoint, it’s hard to think of a better way to create shareholder value than that.

MONEY Student Loans

The Surprising Downside of Steering Clear of Student Loans

Headlines about daunting student loan burdens may leave you scared to borrow altogether. But a college degree is worth the investment, even if that means taking on some debt.

The next generation of college students has heard the message loud and clear about the perils of taking on too much student loan debt—so much so that many are unwilling to go into debt at all in order to attend college.

The drawback to this wariness is that for those who do not borrow, they are unlikely to get four-year degrees.

The vast majority of people aged 16-19 recognize the importance of a college degree, but most say they either want to avoid education debt entirely or to limit their borrowing to nominal amounts, according to a recent survey by Northeastern University of 1,000 teenagers nationwide.

About a quarter of those polled said they want to remain debt-free, while 45% felt they could afford to pay a maximum of $100 a month, which at current interest rates means borrowing no more than about $10,000.

That amount would not cover a single year at many public four-year colleges, even after financial aid is taken into account.

The problem with not borrowing is that most families do not have nearly enough saved to pay for college. About half of U.S. families are not saving for their children’s educations at all, according to a survey by Sallie Mae. Among those who are, the average amount saved is around $15,000. (To see if a school you’re interested in is worth borrowing for, see MONEY’s rankings of the Best College Values.)

Meanwhile, some commonly recommended ways to cut costs—such as starting at a community college or working your way through school—dramatically increase the chances of a student dropping out without a degree.

One recent study found a 17-percentage-point difference in bachelor’s degree completion between those who start at a four-year college and those who start at a two-year school intending to transfer.

Another study found that those who work 30 hours a week or less, excluding work study, were 140% more likely to graduate college within six years than those who worked more.

Now no one expects teenagers to be financially savvy. Many do not understand the difference between bad debt that can sink their finances and good debt that can help them get ahead. The trouble comes when teenagers make an all-or-nothing decision based on their ignorance.

That is true for those who will spend anything to get their degree and those who are so averse to debt they will borrow nothing.

The nuance that the debt-avoiding teens are missing is that those sob stories about unemployed or barely employed college graduates with six-figure student loan debt are very much the minority. (Still, see how you could end up with a six-figure debt for film degree here.)

Even though student loan debt is rising, just 7% of borrowers take out more than $50,000, according to the Brookings Institution’s Brown Center on Education Policy. Only 2% take more than $100,000.

The average debt at graduation for bachelor’s degree recipients is $33,000, said Mark Kantrowitz, author of Filing the FAFSA and publisher of Edvisors.com, a higher education resources site.

That amount may seem formidable, but for most graduates it is not.

“If total student loan debt at graduation is less than the annual starting salary, the borrower will be able to repay his or her student loans in ten years or less,” Kantrowitz says.

For most graduates, that’s the case. The average starting salary for new college graduates this year was $45,473, according to the National Association of Colleges and Employers, ranging from a low of $38,365 for humanities and social science majors to a high of $62,719 for engineers.

Even larger debts may not be cause for concern. About a quarter of the increase in student loan debt comes from rising levels of education—more people attending graduate and professional schools.

Advanced degrees typically confer higher incomes, according to Georgetown University’s Center on Education and the Workforce. Master’s degree holders can expect to earn $2.7 million over a lifetime while professional degree holders can expect $3.6 million.

That compares to the $2.3 million someone with a bachelor’s degree can expect to earn and the $1.3 million expected earnings for those with only a high school diploma.

Of course, not everyone needs or wants a four-year degree. The payoff for a two-year associate’s degree from a community college—an education mostly covered by that $10,000 in borrowing—can be considerable. The Georgetown researchers figured an associate’s degree-holder can expect to earn $1.7 million over a lifetime. What’s more, 28% of associate’s degree make more than the median earned by a four-year degree holder.

For most people, though, the investment in a four-year degree will pay off handsomely in terms of higher incomes and lower unemployment. An unreasonable fear of debt should not be the deciding factor between a good education and something less.

 

TIME Earnings

Uber Reportedly Valued at $40 Billion by Investors

Uber
Andrew Harrer—Bloomberg/Getty Images

Uber’s PR troubles are not scaring off investors

On-demand ride service Uber is raising new funding at a valuation of between $35 billion and $40 billion, according to a new report from Bloomberg. This would be one of the richest “venture capital” rounds in history (Facebook still holds the crown), and likely mean that investors expect Uber to eventually go public at a valuation of at least $100 billion.

T. Rowe Price reportedly is in talks to come aboard as a new investor, while existing shareholder Fidelity Investments also would participate.

There have been market rumors that the round would be structured as convertible debt rather than preferred equity, although those rumors also were married to a $25 billion valuation. If the price has changed, so might have the security type.

It also is unclear if the round — which Bloomberg reports is designed to raise at least $1 billion — would include any so-called secondary sales by Uber employees or early investors. Uber CEO and co-founder Travis Kalanick is on record as saying that, to date, he has never sold any of his stock in the company.

Uber last raised money earlier this year, when it secured around $1.2 billion at a $17 billion pre-money valuation. Since then, it has experienced massive growth and more than its fair share of controversy. Just last week, a company executive floated the idea of creating an opposition research arm to dig up dirt on critical reporters, while another Uber executive was accused of improperly accessing and displaying a specific user’s data.

In addition to Fidelity, existing Uber shareholders include Benchmark, First Round Capital, Lowercase Capital, Menlo Ventures, Google Ventures, TPG Capital, Summit Partners, Wellington Management, BlackRock and Kleiner Perkins Caufield & Byers.

This article originally appeared on Fortune.com

TIME Media

Spotify Still Doesn’t Make Any Money

SWEDEN-MUSIC-COMPANY-SPOTIFY
This photo illustration shows the Swedish music streaming service Spotify on March 7, 2013 in Stockholm, Sweden. Jonathan Nackstrand—AFP/Getty Images

Music streaming service lost $80 million in 2013

Music streaming service Spotify likes to crow about how it hands 70% of the revenue it generates right back to artists in the form of royalty payments. Such a massive expense has led the company to be wildly unprofitable in recent years — but Spotify may be slowly crawling its way out of the red.

A new regulatory filing released in Luxembourg shows Spotify had revenues of 747 million euros (around $1 billion) in 2013, up 74% from 2012, according to The New York Times. The startup posted a loss of $80 million, but that was smaller than its $115 million loss in 2012.

Spotify has long claimed that as it gains more users, it will be able to both pay artists more handsomely and begin earning some profits itself. The company’s financial trends indicate that the plan may actually work, assuming they can keep adding new users at a steady clip.

But Spotify’s biggest threat is growing dissatisfaction in the music industry with the service’s free tier, which allows users to listen to Spotify’s entire song library while hearing a few ads in between tunes. It was this free offering that compelled Taylor Swift to remove her catalogue from the streaming service, while a Sony Music executive recently expressed concern that the free version of Spotify might deter people from signing up for paid subscriptions. The new financial figures show why Swift and others are wary of the ad-supported model: Spotify made just $90 million in revenue from its ad business in 2013, less than 10% of its overall revenue. That’s despite the fact that free users outnumber paid users on Spotify by about four to one.

Spotify maintains that many free users are eventually converted into paying customers, so the free offering serves as a valuable gateway. But it’s likely that industry players are going to become increasingly fixated on the growth in paid subscribers instead. That’s where the money is.

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