I have only studied three companies in my life in which the following the following standard did not produce a good investment: Look for companies with high earnings per share growth that are supported by strong revenue growth and trading at a reasonable valuation. The only times this hasn’t worked out before involved General Electric, Wachovia, and Hostess (the first two had debt and liquidity problems, and the last had labor disputes that destroyed what should have been an excellent lifelong holding.)
Usually, high revenue growth is a sign of a business in good health. Earnings per share growth without revenue growth is likely a result of management strategy, ranging from stock buybacks to cost cuts to productivity gains. And revenue growth without earnings per share growth is likely a signal of share dilution (that’s the problem with Amazon and Facebook right now; the financial news media are often reporting … Read the rest of this article!