Where are corporate profit margins in the economic recovery cycle?

I have often believed that when corporate show $1.00 EPS, investors will find their stock. Now on the case of the ENTIRE stock market, we are beginning to see that come true and this article at Motley Fool covers it:

"While the economy might be in the early stages of recovery, corporate profits could be in the final, dying days of their own rebound. They point to profit margins, or the ratio of net income to sales. Since 1947, corporate profits have averaged about 6% of gross domestic product. Today, they're 9.8% of GDP. And as my colleague Alex Dumortier has shown, margins tend to be mean-reverting. If current profit margins shrink back to their historical norm, it could whack corporate profits -- and stocks.

Fearing a decline in profit margins is a fair point that shouldn't be ignored. But I think it's overblown. The connection between profit margins and profit growth is probably smaller than most assume. And the connection between profit margins and actual stock returns is virtually nonexistent.

Since 1950, here's how real (inflation-adjusted) corporate profit growth stacks up against corporate profit margins:

Period	Real Corporate Profit Growth	Profit Margin at Beginning of Period
1950-60	1.8%	9.8%
1960-70	2.1%	5.5%
1970-80	6.9%	4.2%
1980-90	(1.9%)	5.6%
1990-00	5%	4.6%
2000-10	7.7%	5.1%
Current	--	9.8%

This article at Business Insider talks about how "phantom corporate profits generated by a devaluing dollar will vanish":

"One of the dirty little secrets of the stock market rally is that the rising corporate profits that powered it are largely phantom profits. Why are they phantom? Because they are artifacts of currency devaluation, not an increase in efficiency or production of goods and services.

Though few domestic observers make mention of it, the large, global U.S.-based corporations are now dependent on non-U.S. sales for about 40% of their revenues (50% and up for many companies) and virtually all their profit growth. Overseas sales are made in the local currency: the euro, yen, renminbi, Australian dollar, Canadian dollar and so on, and the profits are stated in U.S. dollars on corporate profit and loss statements."

Clearly corporates are doing much more spending as we are seeing many companies doing early in the year qualitative research projects in comparison to recent years. More to come.