Net profit margins have reached an all-time high of nearly 15.0% as Q2 earnings season winds down. The question now: how sustainable are these margins?
StarMine Earnings Quality (EQ) helps answer this by assessing the sustainability of a company’s earnings. Technology stands out with the highest margin, contributing over a third of total profits, and the highest aggregate EQ score (1 = bearish, 100 = bullish).
The cash-flow component of EQ is particularly relevant in today’s AI investment cycle and may help explain the neutral scores for Communication Services and Consumer Discretionary. Companies such as Alphabet and Amazon are seeing large non-cash mark-to-market gains lift reported earnings while AI capex weighs on free cash flow, widening the gap between reported earnings and underlying cash generation — a dynamic captured by the EQ model.
Comments
Log in or sign up to join the conversation.