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Politics : Don't Blame Me, I Voted For Kerry -- Ignore unavailable to you. Want to Upgrade?

To: sea_biscuit who wrote (78965)	8/16/2006 8:53:01 PM
From: TimF	Respond to of 81568

First let me congratulate you for being the first person here to offer something or a real argument, rather than a simple assertion that its obvious that "big oil is ripping everyone off", combined with ad-hominem attacks against anyone arguing the other side. I have to limit that congratulations thought because all you present is an argument that the companies are profitable, which I never denied, not an argument that there is in fact some secret massive world wide price fixing scheme. While the oil industry habitually downplays its profitability when speaking to lawmakers, the media or the public, it sings an entirely different tune when addressing investors and others in the financial community. What company doesn't spin its current or future profitability in a positive way when talking to investors and the financial community? Return on invested capital is another useful indicator of profitability but it isn't more important or relevant than the others such as profit margin, or profit per employee. It has some of its own problems - "Return on invested capital isn't the scientific measure it's cracked up to be... ...Regardless of how it's calculated, Dell's ROIC has risen rapidly, despite weaker profits, due to its declining invested capital, which (as I calculated it anyway) has fallen 44% over the past three quarters." fool.com BTW Dells ROIC is higher than XOM's. Other companies also have high returns on invested capital. I don't have more recent data but GAP got a return of over 50% in 1998 fool.com Petmed had a three year average ROIC of 51.5% in 2004, but its stock is barely up since then. ROIC will go up if profitability rises from reasons other than new investment. The Oil price goes up, and XOM's and other companies oil sells for more so there revenue and profit both climb faster than new investment climbs. ROIC also goes down if the investment side of the equation goes down. ROIC is a useful measure but not a perfect one. All they need to know is that the oil industry is barely scraping by. Or so the industry likes to say. No they don't like to say that, and they haven't been saying that. "Healthy but unexceptional profit margins" doesn't equal "barely scraping by".