This simple investment fundamental has been overlooked in recent years. Look for the following signs of improving profitability. These indicators reflect the profitability of a company's core operations. It is expressed as a percentage. Inventory turnover measures a company's ability to sell its goods.
Inventory turnover equals the cost of goods sold divided by average inventory.
You want a company that is increasingly productive, which can be shown in the sales generated per each employee. Make sure you take into consideration inflation. The percentage of growth in each of these indicators is not so important as the fact that there is an overall upward trend. With such companies, you must compare the indicators from cycle to cycle. With newer companies, you'll be able to analyze only as far back as the data goes.