The rationale for using gross profitability, rather than
any other measure of profitability like earnings or EBIT, is simple.
Not exact matches
And he said Comcast wouldn't sacrifice the
profitability of its
other businesses to build the wireless unit, promising wireless would be profitable on its own by some
measures after reaching only «limited scale.»
Figure 2 compares Skechers to a number
of other shoe / apparel companies in the «Athleisure» segment across
measures of profitability, growth, and valuation.
The traditional methods
of cold calling and follow ups have lost a fraction
of profitability since the introduction
of the Do - Not - Call registry, causing telemarketers and SMS campaign owners to undertake
other measures in order to sustain sales.
Both the gross
profitability and simple value B / P factors provide an interesting conundrum, appearing stretched on one
measure of valuation but less so on the
other.
In a 2010 paper called «The
other side
of value: Good growth and the gross profitability premium,» author Robert Novy - Marks discusses his preference for «gross
profitability» over
other measures of performance like earnings, or free cash flow.
Stock valuations are never absolute — it is always a question
of the
other assets you are
measuring the stocks against, and how you desirable those
other assets will be in the future, and how sustainable the
profitability of stocks will be over time.
Any
other measure, like simple popularity or
profitability, can clearly result in damaging ultimately unsustainable attitudes and actions becoming popular and profitable contrary to the advacement
of humanity.
It also kicks open the door
of measuring profitability not only
of the newcomer, but then every
other partner in the firm.
AmLaw and
others already publish a large number
of other financial stats and
measures of law firm performance;
profitability is just one figure among many.