Try Companies That hold Cutting Co...

Try Companies That hold Cutting Costs

Companies that can bring to the costs of making and selling their products-consistently-are generally worth studying for possible investment. The leading ratio for quantifying a non-financial company's efficiency in making and selling consequences is the "Operating Profit Margin" ("OPM") which is calculated as: where:

Operating Profit = Total return minus Total Costs of Making & Selling produces

Generally, the costs of making and selling productions are: materials and labour, general and administrative, depreciation and research and unravelling Note that interest expense is not considered to be a price of making and selling a produce

It is essential to note that the OPM can vary significantly from industry to industry; accordingly, comparing margins across industries is misleading. Studying the direction in a company's OPM is a plenteous more meaningful stock-study procedure.

The accompanying Table reports the top 50 ensues of a computer search for companies that had: (1) increased a nonnegative OPM throughout the last two completed fiscal years; and, (2) had non-negative earnings by share. The search used the Stock Guide database (as at July 26 1997) containing historical data for across 1,000 companies.

Because of frequently unique cost structures, the following originals of companies were excluded from the computer riddle : Integrated mines, mining, gold and precious metals, oil and gas farmers oil and gas or forest services, banks and trusts, leasing, financial and mortgage, investment companies and stocks insurance and financial management companies. In total the computer cover identified 80 companies that had reported consistent increases in OPM above the last two fiscal years.

Copyright Canadian Shareowner Magazine Inc. Sep/Oct 1997

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