Graylynchett,bear in mind that in the simple demo P&L we are not...

Graylynchett,

bear in mind that in the simple demo P&L we are not talking about fixed costs remaining constant over time; rather we had actively allowed for them to rise by 3%pa, so CPI-ish.

But you've hit the nail on the head with your reference to the ability of sustaining organic revenue growth in excess of growth in fixed costs to perpetuity... it is a rare phenomenon and something that only very few companies are able to achieve.

RMD and RMD are the most obvious example of companies that has achieved this virtuous outcome over a period of almost two decades, and other examples that spring to mind are REH, RHC, BRG, ARP, and WOW.

Because of its very limited evidence, and to answer part two of your question, I usually only apply this to forecasts over a medium-term, say 3 or 5 years, which forms the timeframe basis for my valuations.

Cam