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Is a Corporate Margin Collapse on the Horizon?

45 mins.
30 MARCH, 2023
Leopoldo Torralba
Ignacio de la Torre
Macro Global Long-term trends Global AER Global
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The success of investments depends to a large extent on the future growth of corporate earnings, whether it is in equity, credit, or venture capital. Therefore, corporate margins measured as profit on sales are crucial in determining the expected future profitability of such investments. It can decisively influence a company's profit growth or risk profile compared to its creditors. All of this plays a significant role in determining the financing conditions or the earnings multiple paid by investors. After observing almost continuous increases in corporate margins for many years, in this report we analyse whether we will begin to see structural declines at a global level, and if so, whether they will be significant or not, and why. Correctly predicting this trend will be critical in optimising investment returns and the financing conditions prevailing in the markets.

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