Consolidation.
It seems that a lot of folks see this as a good climate for doing some venturing....
How did you get an A when the class average was a C?
Depending on a company's fixed costs and margins, a total 2% increase in revenues can produce a significantly greater percentage increase in its profits.
“So how can the profits expand 6 points faster than the overall economy that drives the sales that largely determine the course of those profits?”
Well, technically it is possible through efficiency, cost reductions and productivity gains.
All very, very healthy for a business and economy.
Though eventually consumer income and wealth diminish. And the cycle returns.
Lots of pent-up growth out there.
In the Southeast, right now you can't throw a rock without hitting new construction, major remodeling (seems like every restaurant is doing one....) or a "Now Hiring" sign.
Nice to see things booming. Been a few years.
How? By cutting costs.
He seems to be comparing one set of estimates to another set of estimates. The real answer is: Trump!
It is called operating leverage.
Revenue grows at x%, and profit grows at (x+ ol)%
Dumb question:
Last year:
Sales 1,000
Costs 900
profit 100
This year
Sales up 2% 1,020
costs up 1% 910
profit 110
profit up 10% (110/100)
Not EVERYONE was going broke during the Great Depression.
A third were going broke
A third were surviving
and a Third were having their most profitable years ever.
JMHo
Easy. It ain’t 2% growth. It’s a lot more.
We post jobs numbers, new startups, new expansions EVERY DAY here on FR and they are stunning.
AZ, for example, is growing by leaps and bounds. INTEL’s expansion alone in Chandler will account for thousands of new jobs. Building on every corner.
How ?
Lotsa cheap imports sold by our national chain stores ?
Nuttin 2 C here, move on.
It’s embarrassing that a supposed “Business publication” like Forbes would hire a person who is dumb enough to write this.
Stock buybacks with cheap money. No real growth, just fewer shares and higher earning per share.
How? 2 things not considered:
1) Maybe the economy is growing at greater than 2%;
2) Maybe these companies are getting significant sales outside of the US; and
3) The biggest reason is leverage. Not just financial leverage, but the natural per unit cost reduction that occurs as sales increase. R&D costs are static, once a product has been developed. The cost of the physical plant (including property taxes) of a company is static. Those 2 costs alone are a substantial part of any company’s costs - so if you have a gross profit margin of 30% or 50% on any particular good, then selling more units causes profits to go up much faster than revenues.
Fewer and fewer paying for more and more.
Raise EPS by stock buybacks.
They measure different things. GDP is related to aggregate demand and profit is a measure of the difference between sales revenues and costs.