Thanks for that @Portfolio. In terms of operational leverage, in...

Thanks for that @Portfolio.

In terms of operational leverage, in my mind this is a double edged sword. To me, it essentially means your fixed costs are a high proportion of your gross profit (ie, you have thin margins). This means that a small increase in your revenue can translate to a big increase in your EBIT, as you know.

So if you strongly believe revenues are on their way up, and are going to stay up, with minimal need for additional capex (ie, a structural change is occurring), then relying on op leverage would make much sense. But of course this requires your thesis to be correct, otherwise all that promise will turn into disaster. I guess, thus far, the thesis is playing out.

With regards to your moat comments, high customer captivity (switching costs higher than cost of product) and granular customer spread, certainly does sound like a formidable potential competetive advantage.

So as long the product is of high enough quality, the moat can be readily defended. Or as you say, the products compete on performance rather than price.

So there should be some pricing power, which is a very nice thing to have.

This to me sounds like customer relationships and distribution networks are the key sources of competitive advantage. Clearly, however, to sustain this, R&D is critical. And as it becomes a smaller proportion of op costs, it will be easier and easier to sustain.

On the flip side, I heard management say (can't remember where I read it) that amalgam profitability has been suffering because of (at least in part) pricing pressures, in part due to increasing purchasing power of dental chains (which is great for my 1300Smile shares shares ). This would indicate a lack of pricing power and customer captivity. Of course, it's quite possible that this is more an issue for the more commoditised amalgam segment. Perhaps.