How Do I Evaluate Revenue Growth Trends?

While headlines often scream about earnings and P/E ratios, the true, fundamental health of a company is often revealed in its top line. If sales aren't growing, the party has a definite expiration date. This episode is your guide to looking under the hood of a business and answers a critical question from our community:

How do I evaluate revenue growth trends?

We provide a complete, step-by-step framework for analyzing a company's revenue, the "gas in the tank" that fuels all future growth. Learn how to calculate key metrics like Year-over-Year growth and Compound Annual Growth Rate (CAGR), and discover why a growth number is meaningless without context. We'll show you how to identify the quality of the growth—is it healthy and organic, or just the result of price hikes and acquisitions? Finally, we'll teach you to spot the major red flag of decelerating growth that many investors miss.

This deep dive will empower you to move beyond surface-level numbers and truly understand what's driving a company's success. How did a company grow, why did it grow that way, and can it continue? Subscribe to learn how to answer the questions that matter.

Key Takeaways

• Revenue is the "Gas in the Tank": While earnings represent efficiency, revenue is the raw fuel that powers a business. Cost-cutting can only boost profits for so long; without consistent top-line growth, a company has no fuel for sustainable future earnings.
• Context is Everything: A 10% growth rate means nothing in isolation. It must be compared to competitors, industry averages, and adjusted for inflation and currency fluctuations to understand if the company is truly winning or losing market share in real terms.
• Not All Growth is Equal (Organic is Best): You must identify the drivers of growth. The healthiest, most sustainable growth is organic (selling more products to more customers). Growth from price hikes, acquisitions, or one-time events can mask a weak core business.
• Deceleration is a Major Red Flag: A pattern of slowing growth (e.g., from 30% to 20% to 10% year-over-year) is a critical warning sign that a business may be maturing, losing its competitive edge, or facing market saturation. Spotting this trend early is key.
• Dig into the Segments: For large, diversified companies (like Amazon or Apple), overall revenue can be misleading. You must analyze the growth of individual business segments to find the true growth engines (like AWS or Apple's Services) and identify any weaknesses they might be masking.

"You can make earnings look good for a bit, maybe some clever cost cutting... But if sales aren't actually growing, well, that party's got a very definite expiration date."

Timestamped Summary

• (04:09) Context is Everything: Why a 10% Growth Rate Can Be Bad: Learn why a headline growth number is meaningless until you compare it to competitors, industry averages, and inflation.
• (05:50) Not All Growth is Created Equal: Identifying the Drivers: A crucial breakdown of the different sources of revenue growth, and why healthy, organic growth is far more valuable than growth from acquisitions or price hikes.
• (08:16) Digging into the Segments (The Amazon & Apple Secret): Discover why analyzing the individual divisions of a company is critical to finding the real growth engines, like AWS for Amazon or Services for Apple.
• (09:24) The Biggest Red Flag: Decelerating Growth: An explanation of why a pattern of slowing growth is one of the most important warning signs an investor can spot.
• (17:41) Your Revenue Growth Checklist: A complete, actionable checklist that summarizes the entire analytic

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