I read all the time how a company’s stock price takes a hit because it didn’t grow as much as hoped or, even worse, its growth remained flat in a given quarter or year. But if a company has say $100M in revenue and $20M in profits (for example) and then does that year after year, why isn’t that viewed as fantastic? What’s wrong with having consistent revenue (and profits) year after year? Why does the market seem to demand growth? If I owned a company that had great sales and profits every year I imagine I’d be quite happy about it.
In: 11
If you’re an investor choosing between company A and B, company A had a profit of 20million which is awesome but cpany B had a profit of 30 million which is better. You’ll choose B, even if A is still great.
There’s more to it than just that: the risk/reliability of an investment is important. In one case A might not make as much profit, but it does so very consistently which is nice. Whereas B might make loads of profit one year then very little the next, which isn’t very reliable and you now consider it a risky investment.
Latest Answers