Stock Selection Criteria For A High Growth Portfolio - Part 2
By
Jeremy Gard
Level: Basic PLUS I am a full time financial markets professional and Internet business operator. I have worked in the financial services industry and have studied technical analysis ... In our quest for quality stocks that represent good value and good prospects for high growth in the share price, we can't go past considering how much money the company is actually making and review that against its track record to see how this revenue is growing or declining. We want to invest in a company that has increasing revenues which suggests that this company is well placed in its industry and is gaining momentum and creating ways to sell more of its product or service. We'll continue with the example of JB Hi Fi to demonstrate this. Firstly, what is Revenue growth and how is it
calculated? So, we are purely looking here at how much turnover the company is doing each year and comparing that to the previous year. You would in fact, look at both figures as they relate to each other. The criteria for this indicator will obviously then be a little higher compared to what we look for with EPS growth, as we are looking for the company's income to be increasing. Whether they are also increasing their profit margins at the same time is what EPS will tell us. With these two, we can get a clear picture of how the management of our company are growing the business for its shareholders. With our example company - JBH - we look at the Revenue figure which is displayed in the financials section of any of their company reports, or online data sources. ($millions) Once again, we can see that this company has had a good track record of growing its revenue base. 10% per year growth would be a desirable revenue growth figure to look for, but you would also put this level in the context of the economic sector you are looking in. I mean if all companies in that sector are growing at 20-30% per annum and the company you are reviewing is only growing at 12%, then clearly its not performing as well as its competitors. However, as a general guide 10% p.a. growth is good. So, clearly, JBH gets another big tick on this count, in terms of growing its revenues. Again, this alone is not an indicator to go out and start buying the stock. What we are looking for here is simply a company that would be good to own, but the timing of when we enter the market is another story for another day. For more comprehensive investing information and personal wealth creation strategies, check out my website at http://wealthcircles.com/investments Article Source: http://EzineArticles.com/?expert=Jeremy_Gard |
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