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Strategies & Market Trends : Value Investing
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To: CrazyPete who wrote (24466)7/27/2006 3:54:34 PM
From: Paul Senior  Read Replies (1) of 78774
 
Yes, that hypothetical industrial co. presumed to be going from $10 to $14 caught my attention too. Trying to remember my experiences with industrial companies, I suspect that for most industrial companies, if they have to spend $9 (i.e. the expense) to make $10 in sales, they might not so easily or possibly be able to get another $4 in sales (40% sales increase) by spending only $2 more ($14 sale with only $11 expense). Industrials sell something that has a very high cost-of-goods sold component, so expenses can often remain high.

As you suggest though, when somebody starts putting out "But what if..." scenarios, it can degenerate into an absurd debate.
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