Investing Guide · Chapter 4
Cracking the Code of Four Growth Rates
Learn how four critical growth metrics reveal a company's financial trajectory.
Four critical growth metrics reveal a company's financial trajectory. Like puzzle pieces, when analyzed together they provide a comprehensive picture of business worth.
The Four Growth Rates
- Sales Growth Rate: Measures annual revenue increases, indicating consistent business demand and health
- EPS (Earnings Per Share) Growth: Shows how efficiently a business generates profit per share, essential for valuation
- Equity Growth Rate: Reflects a company's ability to accumulate surplus value and reinvest for future expansion
- Cash Growth Rate: Demonstrates whether cash reserves keep pace with profits, indicating effective earnings management
Putting the Puzzle Together
Just as each puzzle piece contributes to the overall picture, each growth rate helps us build a clearer picture of a business's true worth. Examining these metrics collectively enables better-informed investment decisions.
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