Unconsolidated Subsidiary

See: Subsidiary. See: Consolidated Income Statement. See: Consolidated Balance Sheet.

MegaGlop Corp has 12 divisions. They report the financial results of each subsidiary separately. Like...the windshield wiper division last quarter had $378 million in revenues and $28 in earnings. They reported the other 11 divisions separately. The results came to investors a la carte, separately, unconsolidated or mashed together.

Why does this matter? Well, when a company has a dozen divisions and all they report is a consolidated earnings number, that number doesn't really mean a whole lot. Which division is growing fast? Which is dying? Which is flat? Just a single number doesn't convey anything about the elements of the soup, so investors feel lost when looking at that number. And "lost" usually means "low multiple," as investors hate ambiguity. (See: Conglomerate Discount.)

Conglomerates with a dozen divisions that don't report separately get punished by the Street with a low price-to-earnings multiple. Ouch.