Stock Profits: Getting to the Core—New Fundamentals for a New Age

In any attempt to judge a corporation’s fundamentals, the test crite-

ria involve two broad levels: company-specific analysis and com-

parative analysis. We all have standards for judging corporate

outcomes considered acceptable. Among these are tests of gross prof-

it and net return, for example; we hope to see consistent levels in the

gross and net outcomes and, hopefully, not a declining relationship.

When sales fall and expenses rise, resulting in a deteriorating net re-

turn, we consider that a company-specific negative outcome. Compar-

ative outcomes are equally important, notably when we are trying to

decide which stocks to buy or hold and which ...