The Seven Key Printing Industry Ratios from 2014
Profit leaders—printers in the top 25% of profitability—saw profits increase to 10.3% in 2013 and the forecast looks like increasing profits into 2016, based on the 2014-15 Ratios results. Now is the time to make a decision—do you invest those extra profits into growth areas, or do you save for a rainy day? Here Ed Gleeson, Director, Center for Economics and Market Research and Stu Margolis, Partner, Margolis Partners, give a plain-English explanation of the Key Printing Industry Ratios you need to be aware of—to keep your business strong both in good times and in bad.
Increasing profits enable companies to grow by generating capital that can be invested into additional productive capacity, hiring additional workers, and moving into new facilities. Profits can also be retained as a buffer for difficult times, and/or reward shareholders with dividends. Profits play an important role in the success in the economy and our industry.
John E. Silvia, Chief Economist, Wells Fargo Securities states this regarding profits, “When viewed from the context of the business cycle, profits are a residual, or a buffer to fluctuations in the economy. Relative to real factors such as economic growth or employment, as well as inflation, wages or interest rates, profits are far more variable. As a buffer, profits fluctuate significantly over the cycle. Over time, however, profit growth tends to remain stable, indicating that the pace of profit growth is consistent with the pace of economic growth and the offsetting effects of changes in input costs and sales revenues.”
At the current phase in the business cycle, printing industry profits are increasing along with capacity utilization. Profits declined slightly in 2013 compared to 2012, but according to recent readings from various sources printing industry profits are trending upwards in 2014. This increase in profitability along with signs of increasing shipments and capacity utilization make it a good time to review our top Seven Key Printing Industry Ratios.