tag:blogger.com,1999:blog-7294165939647321702.post4750043142966659120..comments2024-03-11T10:31:06.107-04:00Comments on <center><a href="http://www.barelkarsan.com">Barel Karsan - Value Investing</a></center>: Alco Stores Gets Bought OutSaj Karsanhttp://www.blogger.com/profile/04493152766022812984noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-7294165939647321702.post-70578610110760284612013-07-29T15:50:32.318-04:002013-07-29T15:50:32.318-04:00Hi Anon1,
A company with high operating leverage ...Hi Anon1,<br /><br />A company with high operating leverage is riskier because a small change in revenue can produce a drastic change to the bottom line from which the company may not be able to recover.Saj Karsanhttps://www.blogger.com/profile/04493152766022812984noreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-68880194075226436792013-07-29T13:10:55.316-04:002013-07-29T13:10:55.316-04:00Anon,
That's not exactly true. All else being...Anon,<br /><br />That's not exactly true. All else being equal, the free cash flows generated from the low operating leverage firm will have a higher present value than those of the high operating leverage firm.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7294165939647321702.post-8180932713948986992013-07-29T09:44:28.339-04:002013-07-29T09:44:28.339-04:00you're erroneously implying that high operati...you're erroneously implying that high operating leverage is preferable to low operating leverage as a general rule; perhaps you're reaching this conclusion from the false assumption that operating leverage has any relationship to a firm's ability to generate cash flow. as a general rule, it doesn't.<br /><br />high operating leverage usually is accompanied by barriers to entry. and low operating leverage usually is accompanied by super low margin and high competition.<br /><br />one isnt better than the other wrt a firm's ability to generate free cash flow, which incidentally is the only relevant metric as far as ncav investing is concerned.<br />Anonymousnoreply@blogger.com