Why must a company show continued growth year after year in order for it to be viewed favorably in the market?

Question

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

Answer 1

Consistent revenue without making any changes is not a thing

Growth is how you sustain profits. People also just want more money.