Dating men with no money
It is involved in oil and gas exploration, oil refining and the manufacture of petrochemical products. Successful small manufacturing companies in the UK often make expensive products. Originally designed for fishermen and farmers, these waterproof jackets are now fashionable in cities throughout Europe and the US. Quad Electroacousticsis is well-known for its expensive but high-quality loudspeakers and hi-fi equipment.
These companies are successful because they use first-class materials, have excellent quality control and the workers are proud of what they make. Barber & Sons, the Morgan Motor Company, Quad Electroacoustics, Wilkin & Sons. Wilkin & Sons makes jams which British people cannot do without.
Add this to the company's EPS and divide by the share price.
In addition, big R&D budgets are normally an indicator of ample financial resources, so a telling sign of a company in trouble is earnings growth through severe cuts in R&D. Consider Procter & Gamble's leadership in detergents and disposable diapers, or Gillette's edge in shaving.
Besides, there is no guarantee that a patent will ever turn into a marketable product.
One way, however, to perceive the proficiency of R&D is to calculate the percentage of sales that come from products introduced over a period of time, say the preceding three years.
By looking for low PRRs, investors should be able to spot companies that are redirecting current profits into R&D, thereby better ensuring long-term future returns.
Technology investment guru Michael Murphy offers the price/growth flow model.
When evaluating R&D, investors should determine not only how much is invested but how well the R&D investment is working for the company.