U.S. Corporate Profits

According to the U.S. Department of Commerce, the typical U.S. corporation reports a 9.3 cent profit for every dollar of sales. Over the past 60 years, there have been only a few times when it has gotten higher (i.e., 10% in Q4 2011). Since 1953, the profit margin has averaged just 5.9% (< 6 cents per dollar of sales).

 

From the 1950s to the present, when the margin rose to 6.9% or more, or fell to 4.9% or less, it has returned to its 5.9% mean in a little less than five years (on average). According to James Montier, a visiting fellow at U.K.’s University of Durham, profit margins historically have exhibited a strong tendency to revert to the mean. Historically, annual U.S. corporate sales growth has averaged ~ 2% less than GDP growth (source: Robert Arnott, Research Affiliates).