SLT Research's avatar
$17.7m follower assets
Pricing power can be an antidote for inflation
Pricing power, always positive for companies that can sustain it, may be a crucial competitive advantage in the years ahead. As Inflation being also pushed by energy and food prices as a consequence of the war in Ukraine, actions of Central Banks may have "limited" impact and inflation can stay longer than anticipated. The CPI YoY change index rose to 9.1% in the US in June. Rising input costs can erode a company’s profit margin and, ultimately, investor returns.

But companies with clear, sustainable pricing power can protect their margins by passing those costs along to customers.

In some industries, there is greater potential for pricing power:

Joshua Simka's avatar
Media (I realize it's a broad category) seems a little high up given recent subscriber losses at $NFLX. Software's position looks about right though :)
SLT Research's avatar
@tomato the chart does not take into account recent earnings. More generally it exhibits typical Quality factor industries.
Joshua Simka's avatar
@slt_research Thanks for clarifying that!
Reasonable Yield's avatar
This is awesome, where did you get this visual?
SLT Research's avatar
@reasonableyield got it from a Capital Group research paper.

Author

Related