in the long run profits, therefore value, can't rise faster than sales do.
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Of course they can. Bring down the costs. COGS for a heavy non-recurring cost company like Meta and maybe even NVidia and in general all tech companies don't follow this logic at all.
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No, it's a mathematical impossibility.
If profits rose faster than sales over the long run, then soon enough profits would exceed revenues, which obviously can never happen.


It is not a mathematical impossibility that profits rise faster than sales, even over a long period of time, and that is exactly what has been happening for many decades now. This may explain a small part of the increase in the S&P's price to sales ratio.

If profits rise faster than sales over the long run, going from, say, 8% of sales to 12% of sales as they have over the last 60 years, that doesn't mean that profits ever exceed revenues. And it is possible for them to keeping rising for decades more, from 12% to 16% in the next 60 years for example, which is what most of us would call a 'long run'.

And even if 'long run' meant 'for an infinite time', it is STILL possible, as long as the increase slows. For instance, they could go up by 2% in the next 20 years (2024-2044), 1% in the subsequent 20 years, another 0.5% in the next 20 years, and so on, without ever exceeding 16%.

We can all agree that profits can never pass 100%, and even the hypothetical company that found a way to make its products with zero cost would still have to pay taxes, so their gross margin might be 100% but after tax that would still 'only' be, say, 80%. But it is not hard to imagine profit margins rising a little bit from 12% over a long period, or even over an infinitely long period, provided that the decade by decade rise becomes smaller and smaller.

dtb