Expectations Investing

value more than sales does? Cost efficiencies, or inefficiencies, would

have to add or subtract about 3 percentage points, or 300 basis points,

to the PIE operating profit margin of 9 percent in order to be as mate-

rial as sales growth. Given Gateway’s cost structure, that magnitude of

expectations revision seems highly unlikely. So we conclude that operat-

ing costs will not be as important as sales.

The incremental fixed-capital rate would need to quadruple,or

become significantly negative, for it to generate the same per-share vari-

ability that sales generates. Expectations for the incremental working-

capital rate, too, would need to undergo extreme ...