In a recent report, Goldman Sachs highlighted that companies with weak pricing power may outperform as their EBIT margins improve. The report, titled "U.S. Weekly Kickstart," revealed that stocks with weak pricing power are currently trading at a 14% price-to-earnings discount compared to stocks with strong pricing power.

Goldman Sachs constructed a portfolio of Russell 1000 stocks that exhibit low pricing power, ranking in the bottom 25% of their respective sectors. They based their selection on the level and variability of gross margins when compared to their sector peers over the past five years.

According to the report, during periods of improving profitability, investors tend to assign a lower scarcity premium to stocks with strong pricing power. As a result, companies with less pricing power and more variable profit margins tend to outperform.

Among the stocks included in the list are Roblox Corp., Service International, D.R. Horton Inc., Lennar, and Tesla Inc. These companies have seen their gross margin five-year history average levels range from 18% to 22%.

Other companies identified by Goldman Sachs include Bright Horizons Family Solutions Inc., General Motors Co., Hologic Inc., Thermo Fisher Scientific Inc., and Intel Corp. These companies have demonstrated gross margin levels ranging from 12% to 58% over the past five years.

Goldman Sachs also noted that the relative valuation of low-margin stocks compared to high-margin stocks is currently two standard deviations expensive when compared to historical data.

Overall, the report suggests that companies with weak pricing power could offer potential investment opportunities as their EBIT margins improve. However, investors should carefully analyze and evaluate each company's specific circumstances and market conditions before making any investment decisions.

It is important to note that stock market trends and performance can be volatile, and past performance is not indicative of future results.