In a corporate lifecycle, a company experiences most growth during its expansion phase. That's where most returns are being created.
This is why high growth companies deliver huge returns.
source: Ravi Kumar
As investors, we need to qualify the companies in our portfolio.
If they don't meet our cut, we don't invest in them.
Apart from the eventual/current profitability and strong balance sheet, growth is my top requirement.
Here's why:
In a corporate lifecycle, a company experiences most growth during its expansion phase. That's where most returns are being created.
This is why high growth companies deliver huge returns.
source: Ravi Kumar
It can do wonders for your company.
Growing at 30% turns $1 to $13.79 by Y10.
Growing at 10% turns $1 to $2.59 by Y10.
The share price returns a company can generate based on this is significant.
It grew its ARR from $71 million in 1Q 2018 to $1,731 million in 4Q 2022.
The magic of compounding.
I used my Capital IQ to find out what are the stocks that delivered more than 10x returns in the past 5 years and have at least a market cap of $600m USD.
There are 13 companies.
$APPS $XPEL $TSLA
Apart from Ameresco and SolarEdge, others exhibited huge revenue growth.
This tells us future growth is an important ingredient for long term success.
This is echoed by Stanley Drunkmiller too.
Look at this picture.
Left: Year-til-Date
Right: 5 Yr Results
What we're experiencing now is most well-explained by this graph by Morgan Stanley.
In the short term, multiples are compressing due to interest rate hikes.
But...
In the long term, revenue growth drives returns.
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As investors, we need to qualify the companies in our portfolio.
— Kelvin Seetoh (@SlingshotCap) April 7, 2022
If they don't meet our cut, we don't invest in them.
Apart from the eventual/current profitability and strong balance sheet, growth is my top requirement.
Here's why:
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