What would happen if a companies profits just stayed the same over a period of quarters? I obviously don’t understand it at all but isn’t it just unsustainable to expect growth indefinitely?
In: Economics
Well you want to at least pace inflation or you’re actually losing profits. A company that has posted 0% profit growth over the last four years has suffered a significant decline relative to the value of the dollar because everything else costs 20% more.
Plenty of companies don’t target endless inflation-adjusted year-over-year growth though, you just don’t hear about them.
Family owned. Privately held. Utilities. Just remain consistently profitable and you can exist indefinitely.
But when a company sells stocks to investors with the promise of bigger profits and larger dividends later, now they’re expected to deliver on that promise.
The companies that chase endless growth do so specifically because they’ve made this part of their business and investment strategy and they’re now owned by a group of investors that expect this.
These are the companies that investors and financial news organizations care about.
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