When numbers can lie
Feb 02, 2022
4 minutes
STORY JAMES CARLISLE
‘It’s not much use if a product adds a lot of value, if anyone can supply it’
When tasked with finding a quality business, people often start by reaching for the numbers – typically things like margins and returns on equity. But these metrics can only provide a snapshot, are open to distortion and are necessarily backwards looking.
A few years back Woolworths got into the habit of measuring its success by reference to its margins. So, it kept pushing them higher until the earnings before interest and tax (EBIT) margin in its Australian supermarkets business reached more than 7%
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