Peak profits: The age of the torporation

by / Thursday, 22 October 2015 / Published in Economy

UK Only Article: 
standard article


Reinventing the company

Fly Title: 

Peak profits


Big listed firms’ earnings have hit a wall of deflation and stagnation



Main image: 


THE idea that profits grow is embedded in the corporate world. Bosses’ pay rises if they boost earnings per share. Managers who admit their firms may shrink are viewed as cowards and taken outside and shot. Lenders assume that firms’ cashflows will grow, allowing them to repay debts. In a daft ritual, Wall Street analysts start most years by collectively forecasting that earnings per share will rise at double-digit rates. Actual growth has been lower but has still had a dazzling run, averaging 8% over the past 30 years for the S&P 500 index of big American firms. Even after the 2007-08 crisis floored the global economy, profits recovered smartly.
Perhaps that is why reality has yet to sink in: the …
Source: The Economy