CHART OF THE DAY: A Breakdown Of S&P 500 Company Costs Since 1994

CHART OF THE DAY: A Breakdown Of S&P 500 Company Costs Since 1994
SAM RO MARKETS MAR. 18, 2014, 11:27 PM
Corporate profit margins are right at record highs.
Coming out of the financial crisis, fattening profit margins have helped corporate profits surge despite lackluster revenue growth.

“Firms have enjoyed a secular increase in the productivity of labor and capital as well as technological innovations such as real-time inventory management, reducing both fixed and variable costs,” said Goldman Sachs’ Amanda Sneider in a new research note. “Low inflation in terms of commodity inputs and labor costs have been tailwinds. Taxes and interest rates have never been more favorable for the profitability of firms.”
Economists and analysts are split as to what happens next. Some think there’s room for further expansion. Others think they’re doomed to collapse.
“Looking forward, the forces that influence margins are equally balanced between upside and downside,” said Sneider. “We forecast trailing four quarter net margins will remain at peak levels in 2014 before rising to a new peak of 9.0% in 2015.”
For some historical context, Sneider offered this chart showing how each expense component contributed to widening margins.
“Rather than one major factor pushing margins to record levels, over the last 20 years almost every component of the income statement has shrunk relative to sales,” she noted.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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