Common Stocks and Uncommon Profits – Point Six

What is the company doing to maintain or improve profit margins?

  • Past profit margins provide a basis for analysis, but the investor should be most concerned with future profits.
  • When profit margins of a whole industry rise because of repeated price increases, the indication is not a good one for the long-range investor.
  • The investor should give attention to the amount of “ingenuity” of the being done on new ideas for cutting costs and improving profit margins.
  • Companies that are the most successful running an efficient business build up an arsenal of best practices and generally continue to operate with a high-degree of efficiency going forward.
  • These companies offer the best long-range investments.
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