When evaluating a business, I pay close attention to the ability of the prospective business to raise prices that it is able to charge for its good or services each year. Along with improved improved technologies/lowered costs, increased sales, and share buybacks, this is the remaining element that can lead to increased profit per share.
Arguably, pricing power is the most significant factor in identifying a buy-and-hold investment because it actually is the manifestation of a competitive advantage. With share buybacks, the only requirement is that there must be cash somewhere on the balance sheet that can be used to lower the share count outstanding. With lowered costs, the competition often benefits from the same technological development, so it is rarely proprietary and/or competitive benefits to the business itself. Increased sales is closer to measuring the competitive advantage of a business, but sometimes, it could just be that a healthy … Read the rest of this article!