Go to Jeff Salisbury LWGate Home Page.From: "Tom Worley" <stkguru@netside.net>
Subject: Re: [CANSLIM] Profit margin
Date: Sun, 24 Feb 2002 02:25:04 -0500
Previous Article (by Subject): Re: [CANSLIM] Profit margin Spencer48@aol.com
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jans, Certainly, sales can remain flat while earnings grow and still be a positive. This normally would occur with a change in business activity as the company's product line shifts into higher margin products. The key is that when sales are flat, and earnings growing, you must carefully investigate what is going on. If it is a shift into higher margin products, then you must satisfy yourself that this can continue. If it is simply a result of cost cutting, then you must evaluate what this means for future growth. Tom Worley stkguru@netside.net AIM: TexWorley - ----- Original Message ----- From: <Spencer48@aol.com> To: <canslim@lists.xmission.com> Sent: Saturday, February 23, 2002 11:41 PM Subject: Re: [CANSLIM] Profit margin > Tom: > > When sales don't grow much, and earnings do, couldn't this be because > the profit margin has increased? And why do you believe (if you do) that > this is relatively unimportant? Because of Enron? > > As an example of sales not growing nearly as fast as earnings, a company > in the defense industry sells mainly to the government. Now their sales are > not going to increase very much (because their main customer is the > government); however, there are not too many competitors for what they are > selling and the government wants (mainly maintenance/replenishment > armaments-not anything whiz-bang). After 911 the governments demand for the > products more immediately would create an urgency to buy. > > Therefore, assuming that the government wants the goods enough, sales > would remain steady even as earnings increased-because the company could > increase its profit margin (I'm not talking about gouging;the mark-up was > relatively low before, and now-after 911-it is relatively high). So, if the > chart looks good, wouldn't it be problematical to focus too much on the lack > of sales increase by the company? > > jans > > > In a message dated 2/23/2002 6:42:43 AM Eastern Standard Time, > stkguru@netside.net writes: > > << When earnings grow > without comparable growth in sales, it is a warning that it is a result of > cost cutting efforts. And when sales grow without comparable earnings > growth, it is a warning of price cutting or a shift towards lower margin > products. >> > > - > -To subscribe/unsubscribe, email "majordomo@xmission.com" > -In the email body, write "subscribe canslim" or > -"unsubscribe canslim". Do not use quotes in your email. > > - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email.
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