I often prefer low margins to high margins.
Not because of the underlying business fundamentals. I understand high margins typically indicate pricing power, customer stickiness, etc.
But low margins signal improvement potential.
I get suspicious when the margins are abnormally high (>>30%). Can they be sustained? How can they possibly be improved? How come they're so much higher than industry peers?
Low margins: There's an opportunity to remove bloat & fat and/or equal the margins of competitors. This is the upside that generates a MOIC.
