Evaluating stocks : Growth
1Y Forward Revenue Growth
Revenue is the amount of money that a company receives in lieu of goods sold or services rendered
The data item is calculated as the percentage change between estimated revenue for the current financial year and actual revenue for the most recently reported financial year
The data items gives an idea about the expected growth in revenue during the current financial year. It is important to note that estimate of revenue for the current financial year will change, during the year, depending on analysts estimate of the same
High revenue growth indicates that the goods or service offered by the company is found acceptable by the market and that the company is able to successfully expand its business. Over the medium term only high revenue growth will lead to greater profitability and hence a company should always seek to expand its business. Higher the expected revenue growth, the better
High revenue growth indicates that the goods or service offered by the company is found acceptable by the market and that the company is able to successfully expand its business. Over the medium term only high revenue growth will lead to greater profitability and hence a company should always seek to expand its business. Higher the expected revenue growth, the better
1Y Historical Revenue Growth
The data item is calculated as the percentage change between actual revenue for the most recent reported financial year and the revenue for the financial year before that. The data item allows to understand the actual growth rate of revenue during a particular financial year
5Y Historical Revenue Growth
The data item is calculated as the compounded annual growth rate (CAGR) of revenue over the previous 5 financial years. Compounded annual growth rate is the average annual growth rate of an item over a specified period of time longer than one year. Consider the growth rates of sales for a few years in the below table:
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 | |
| Actual sales | 700.0 | 920.0 | 850.0 | 910.0 | 1020.0 | 960.0 |
| Yearly growth rate | 31.4% | -7.6% | 7.1% | 12.1% | -5.9% | |
| CAGR | 6.5% |
While it is obvious that between FY2010 and FY2015 the sales of the company increased, the increase and decrease in the interim years does not allow us to understand the approximate yearly growth rate. In such a scenario using compounded annual growth rate is very helpful. CAGR number in the above table has been calculated using the below formula:
((Sales in FY2015 / Sales in FY2010) ^ ( 1/N)) -1, where N is the number of years of growth rate i.e 5
Higher the historical revenue growth rate, the better
Higher the historical revenue growth rate, the better
1Y Forward EBITDA Growth
Earnings before interest taxes and depreciation (EBITDA) measures the company’s operating performance. It is calculated as revenue minus operating costs excluding depreciation and amortisation costs. The data item is calculated as the percentage change between estimated EBITDA for the current financial year and actual EBITDA for the most recently reported financial year. As the data item is based on analysts estimate of EBITDA for the current financial year, the growth estimate, during the year, will change depending on the analyst’s outlook of EBITDA
When expanding its business, a company should also seek to expand its operating profitability. If the revenue of the company grows at a fast pace without commensurate growth in EBITDA, EBITDA margin will fall leading to lowered net profit margin as well
Suppose in year 1, the revenue of the company was Rs.100 and EBITDA was Rs.30. EBITDA margin during the year would be (30/100) 30%. In year 2, revenue of the company grows by 10% to Rs.110, whereas EBITDA grows only by 5% to Rs.31.5. EBITDA margin during the year is now 28.6%. However if the EBITDA had also increased by 10% to Rs.33, EBITDA margin would have been (33/110) 33%. It is important to seek out companies whose EBITDA growth is at least the same as its revenue growth rate, if not more
Suppose in year 1, the revenue of the company was Rs.100 and EBITDA was Rs.30. EBITDA margin during the year would be (30/100) 30%. In year 2, revenue of the company grows by 10% to Rs.110, whereas EBITDA grows only by 5% to Rs.31.5. EBITDA margin during the year is now 28.6%. However if the EBITDA had also increased by 10% to Rs.33, EBITDA margin would have been (33/110) 33%. It is important to seek out companies whose EBITDA growth is at least the same as its revenue growth rate, if not more
1Y Historical EBITDA Growth
The data item is calculated as the percentage change between actual EBITDA for the most recent reported financial year and the EBITDA for the financial year before that. The data item allows to understand the actual growth rate of EBITDA during a particular financial year
5Y Historical EBITDA Growth
The data item is calculated as the compounded annual growth rate (CAGR) of EBITDA over the previous 5 financial years. Compounded annual growth rate is the average annual growth rate of an item over a specified period of time longer than one year. Consider the growth rates of EBITDA for a few years in the below table:
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 | |
| Actual EBITDA | 70.0 | 92.0 | 85.0 | 91.0 | 102.0 | 96.0 |
| Yearly growth rate | 31.4% | -7.6% | 7.1% | 12.1% | -5.9% | |
| CAGR | 6.5% |
While it is obvious that between FY2010 and FY2015 the EBITDA of the company increased, the increase and decrease in the interim years does not allow us to understand the approximate yearly growth rate. In such a scenario using compounded annual growth rate is very helpful. CAGR number in the above table has been calculated using the below formula:
((EBITDA in FY2015 / EBITDA in FY2010) ^ ( 1/N)) -1, where N is the number of years of growth rate i.e 5
Higher the historical EBITDA growth rate, the better
Higher the historical EBITDA growth rate, the better
1Y Forward EPS Growth
Earnings per share (EPS) is calculated as net profit divided by the common shares outstanding. EPS is a portion of the company’s profit that is allocated to each outstanding share of common stock
The data item is calculated as the percentage change between estimated EPS for the current financial year and actual EPS for the most recently reported financial year
EPS growth indicates the growth rate of the company’s profit, per unit of equity. Theoretically, a company might be able to expand its operations and increase its profits by issuing more shares and investing the same into business. However because of increase in the number of shares, EPS will not grow. A company that is able to grow its profit, per unit of equity, is considered to be efficient
EPS growth indicates the growth rate of the company’s profit, per unit of equity. Theoretically, a company might be able to expand its operations and increase its profits by issuing more shares and investing the same into business. However because of increase in the number of shares, EPS will not grow. A company that is able to grow its profit, per unit of equity, is considered to be efficient
1Y Historical EPS Growth
The data item is calculated as the percentage change between actual EPS for the most recent reported financial year and the EPS for the financial year before that. The data item allows to understand the actual growth rate of EPS during a particular financial year
5Y Historical EPS Growth
The data item is calculated as the compounded annual growth rate (CAGR) of EPS over the previous 5 financial years. Compounded annual growth rate is the average annual growth rate of an item over a specified period of time longer than one year. Consider the growth rates of EPS for a few years in the below table:
|
While it is obvious that between FY2010 and FY2015 the EPS of the company increased, the increase and decrease in the interim years does not allow us to understand the approximate yearly growth rate. In such a scenario using compounded annual growth rate is very helpful. CAGR number in the above table has been calculated using the below formula:
((EPS in FY2015 / EPS in FY2010) ^ ( 1/N)) -1, where N is the number of years of growth rate i.e 5
Higher the historical EPS growth rate, the better
Higher the historical EPS growth rate, the better
1Y Forward Operating Cash Flow Growth
Cash flow from operating activities (CFO) indicates the amount of money that a company is able to generate via its normal business operations. This does not include investment income like dividend or interest income or money inflow via debt raised or equity issued. A company that can consistently generate positive cash flows from its daily business operations is highly valued by investors
The data item is calculated as the percentage change between estimated operating cash flow for the current financial year and actual operating cash flow for the most recently reported financial year
The data item is calculated as the percentage change between estimated operating cash flow for the current financial year and actual operating cash flow for the most recently reported financial year
1Y Historical Operating Cash Flow Growth
The data item is calculated as the percentage change between actual CFO for the most recent reported financial year and the CFO for the financial year before that. This data item allows to understand the growth rate of CFO during a particular financial year
5Y Historical Operating Cash Flow Growth
The data item is calculated as the compounded annual growth rate (CAGR) of CFO over the previous 5 financial years. Compounded annual growth rate is the average annual growth rate of an item over a specified period of time longer than one year. Consider the growth rates of operating cash flow for a few years in the below table:
| FY2010 | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 | |
| Actual operating cash flow | 40.0 | 52.0 | 47.3 | 57.8 | 62.3 | 57.4 |
| Yearly growth rate | 30.0% | -9.0% | 22.2% | 7.8% | -7.9% | |
| CAGR | 7.5% |
While it is obvious that between FY2010 and FY2015 the operating cash flow of the company increased, the increase and decrease in the interim years does not allow us to understand the approximate yearly growth rate. In such a scenario using compounded annual growth rate is very helpful. CAGR number in the above table has been calculated using the below formula:
((Operating cash flow in FY2015 / Operating cash flow in FY2010) ^ ( 1/N)) -1, where N is the number of years of growth rate i.e 5
Higher the historical operating cash flow growth rate, the better
Higher the historical operating cash flow growth rate, the better
3Y Historical Dividend Growth
Dividend is the portion of company’s profit that is paid out to shareholders. Dividend per share (DPS) refers to the total dividend paid out divided by the common stock of the company. DPS allows investors to earn back a portion of their investment and is an important aspect of stocks returns
The data item is calculated as the compounded annual growth rate (CAGR) of DPS over the previous 3 financial years. Compounded annual growth rate is the average annual growth rate of an item over a specified period of time longer than one year. Consider the growth rates of DPS for a few years in the below table:
| FY2010 | FY2011 | FY2012 | FY2013 | |
| DPS | 7.0 | 9.2 | 8.5 | 9.1 |
| Yearly growth rate | 31.4% | -7.6% | 7.1% | |
| CAGR | 9.1% |
While it is obvious that between FY2010 and FY2013 the DPS of the company increased, the increase and decrease in the interim years does not allow us to understand the approximate yearly growth rate. In such a scenario using compounded annual growth rate is very helpful. CAGR number in the above table has been calculated using the below formula:
((DPS in FY2013 / DPS in FY2010) ^ ( 1/N)) -1, where N is the number of years of growth rate i.e 3
Higher the historical DPS growth rate, the better
Higher the historical DPS growth rate, the better
Comments