Focused Compounding Ep 467. Gross Margin & Gross Profit Per Share as Predictors of Stock Price Performance
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Aug 1, 2025 Discover the pivotal role of gross profit and margin metrics in assessing stock performance. The hosts dissect Palantir Technologies, revealing potential pitfalls in interpreting these figures. Explore company valuation, with insights on high price-to-sales ratios and the evolution of giants like Amazon. Learn how customer profitability impacts marketing investments, with examples from Home Depot and commodity markets. They discuss pricing strategies and the ups and downs of brands like Crocs in fluctuating market conditions.
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Gross Profit Justifies Sales Spending
- High gross profit supports heavier investment in selling and advertising.
- Low gross profit cannot justify high sales expenses or growth spending.
MoviePass Failed Bargaining Strategy
- MoviePass lost money on each ticket but aimed to build scale and bargaining power.
- They failed as theaters implemented similar plans themselves and power shifts remained with theaters.
Gross Profit Predicts Momentum
- Gross profit momentum is a strong predictor of future stock momentum.
- Gross margin reflects the gap between cost and customer value, signaling business strength early.