Unit Economics - the profitability of a single unit of output, often
focused on the variable costs of production. This textbook definition
evokes memories of economics 101 courses, endless case studies
demonstrating step cost functions and economies of scale. To us,
Unit Economics is more than an economics concept or business
name: it defines who we are.
Let's start with profitability. We formed Unit Economics with the
conviction that better ideas make our clients more profitable. In the
long-run, we believe share prices are driven by the future
profitability of the underlying businesses. While most of Wall Street
focuses solely on predicting top-line growth, we think the best
insights into future earnings are gleaned from detailed modeling of
fixed and variable costs: the Unit Economics of the firm.
Understanding the cost structure, input cost inflation/deflation and
their leads and lags, incremental margins, and capacity utilization is
the key to assessing the future earnings of a company.
Variability is an essential element of Unit Economics. We, like most
of our clients, are compensated based on how well our ideas
perform. Unlike most independent research firms, subscriptions
can be cancelled at any time by our clients if they do not feel that
we are adding value to their investment process. The rewards -
and frustrations - of this 'eat what you kill' model ensure that our
interests and the interests of our clients are aligned.
Independent research for institutional investors, especially when
targeted toward hedge funds, is a competitive business. Take a
look at our coverage, products, and sample reports. We think you
will agree Unit Economics is an exceptional firm - one that can
become an indispensable part of your equity research process.
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