In an earlier post, I mentioned that one can find stocks by using screeners such as what can be found on Finviz.com and I referenced Finviz because I use it very often. However, I realize that finding a company is one thing but deciding to invest in it can be intimidating, therefore, I am sharing a way that one could assess a company’s financial path in a simple manner. This will reinforce the idea that a picture is worth a thousand words.
So, let us assume that you already found a company and attracted to it for some reason. Now, similarly to how one can look at the stock’s chart/graph to observe any pattern that could help determine the price point at which to buy shares, there are some sites that plot charts/graphs of companies’ financial information trends. One such site is www.macrotrends.net, and there you can see an example of a company’s annual and even quarterly revenue growth trend. I believe that the company shown in the Macrotrends link above is a good example of what may be considered a bullish revenue growth trend. However, keep in mind that any disruption of such a trend should cause a reversal in the stock’s price. Additionally, keep in mind that most companies’ trend will not be as smooth as this company’s.
(Disclaimer note: While I am an investor in the company shown in that link above, mentioning it is simply for the purpose of demonstration. I am not recommending it nor do I recommend any company for that matter. I am NOT a financial adviser.)
While there are a number of other metrics by which to measure a company’s financial path, my favorite is what is demonstrated in the link above; Revenue Growth. I believe that many things can be hidden in a company’s financial account of its operation, but as long as I see measurable growth in comparable periods, it is a good enough place for me to start getting comfortable. Conversely, if I see a company with decelerating revenue growth trend, I would pause before investing and try to understand why it is happening. It makes no sense to me to make a long term investment in accompany with a decelerating growth trend.
As a result of the Covid19 pandemic, we should expect to see revenue trend disruption in a large number of companies in the upcoming earning seasons. This is something to take into consideration when assessing companies using this method and it is also important to remember to look at longer periods of data.
Remember that this is one of my personal preferences because I believe that revenue growth gives a company a lot of flexibility to manage its finances. However, whatever preference you may have, you may be able to pull it up on Macrotrends or similar sites, instead of having to assess the raw financial statements. Good luck!