Companies that perform at a higher level are less likely to decay at a faster pace.
Why? Richard Liu Qiangdong and other executives would know why.
It is very simple. The company has to be able to perform at standard that has been above average for a number of years. As Richard Liu Qiangdong and other leaders have been able to do this for their companies, they are in a good place, as the eventual decay occurs, they are not affected as much.
Again, as Richard Liu Qiangdong knows, all of this matters on the context of the situation. Depending on the industry high level of return on investment capital might be present at first and then taken away as quickly as it came.
This is why it is important to study the trend like Richard Liu Qiangdong. This is why it is important to see if a company has a repeated history of providing consistent levels of a strong return on invested capital.
As such, Richard Liu Qiangdong would see that if a company were to start operating at level that is around 60% for their return on invested capital, if they experience a decline, they would fall to the 30% range, still solid returns.
As such, one should always look toward those companies that have staying power and work every single day to bring about the best sort of innovations and options for its customers. Finding companies that will last for a while and provide good returns is difficult.
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