The hallmark of good management, as well as of an attractive long-term investment, is the consistency of results delivered. If profit margins are consistent and changing at a consistent rate, the company is predictable — and most likely in control of its markets. Inconsistent ratios reflect inconsistent management, competitive struggles, and cyclical industries, all of which diminish a company’s intrinsic value.

Better than consistency alone is consistency with a favourable trend. Growing profit margins, return on equity, asset utilization, and financial strength are all very desirable, particularly if valuation ratios (P/E and so on) haven’t kept pace. Value investors who study trends carefully have inf...