Is it more desirable for a company to generate more profit dollars or maximize profit margins? So, as an example, would you prefer to have a company sell $100 of revenue at a 50% profit margin or $200 of revenue at a 25% profit margin?
Trending Content - Hedge Fund Forum
Career Resources
Depends on the industry in terms of what exactly is an attractive margin/profit dollar balance. Generally, I prefer companies that are achieving sustainable above-industry margins because it gives the management team a higher breakeven and more opportunity to generate good ROIC.
That said, weak margins are more fun to dig into if we are pursuing an activist strategy.
It really depends. For example, if both companies are in the same industry. I'd rather take the company generating $200 in revenue since a change in management or cost structure could increase margins. However in general i'd take higher margins, as it allows for easier management capabilities. Why have a ton of revenue if your only getting pennies?
Perferendis qui dolor enim autem. Repudiandae soluta velit numquam non sunt sed. Porro dolore nobis reiciendis magnam. Sit aliquam eos ratione aut. Consequatur id saepe dolor.
Repudiandae quia recusandae nisi ut dolores ipsam. Eos qui accusamus velit amet rem.
Nesciunt maxime porro sit. Dolorum dolore et ipsum harum. Eos repellendus ut enim omnis porro. Ducimus doloremque veniam assumenda est.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...