What matters more -- margins or absolute profits?
I've noticed that there is a lot of focus on margins when it comes companies (i.e. within a particular industry, better margins are better). My question is what do you think is more important when valuing a company, margins or absolute profits? If in the end we care about absolute cash flows, why is there such a big focus on margins? Maybe I'm simply thinking about this wrong, but I'm curious to hear what you all think.
Capex has low margins for breakfast (i.e. low cash flow). Especially if you expect companies to grow, high margins are awesome especially when a signiciant chunck of the costs are fixed.
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