Pricing flexibility refers to a company’s ability to raise prices because it has strong demand. Pricing flexibility is a positive attribute that signals a strong competitive position, rising market shares, and excellent brand equity. On the other hand, price reductions generally portend weak demand, shrinking profit margins, and in the extreme financial distress. Companies normally cut prices because their products are uncompetitive and they are losing market share. We want to own companies with pricing flexibility since it normally leads to rising earnings estimates. Rising estimates (aka “positive revisions”) are the best long term indicator of higher stock prices.