Episode Details

Following up on my previous data updates, where I looked at the ingredients that moved hurdle rates in 2023, I look at profitability at companies. I start with a defense of profitability and value creation as the end game in business, partly in response to ill-thought through and misconceived notions of stakeholder wealth maximization and its offshoots - sustainability and ESG. I first examine profitability across sectors and regions, by scaling profits to sales (margins) and then by scaling profits to capital invested (accounting returns). I close by comparing these returns to hurdle rates, and concluded that 80% of companies across the globe generated returns that were less than their hurdle rates. If doing good for society requires healthy and profitable companies with surplus profits, delivering those surplus profits is getting harder to do with globalization and disruption.
Slides: https://pages.stern.nyu.edu/~adamodar/pdfiles/blog/DataUpdate5for2024.pdf
Post: https://aswathdamodaran.blogspot.com/2024/01/data-update-5-for-2024-profitability.html

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