Quote:
Originally Posted by WSSix
From a long term point of view, wouldn't it better that a company grew by 32% even if they did indeed miss expectations by 1 penny? I realize the price of the stock is based on expected earnings but 32% growth year to year is good. I personally would rather know they had great growth. Am I wrong in thinking that's more important to me since I'm long term?
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Growth always (usually
) trumps all else... unless they just have really inept management.
Growth has to be measured by different metrics.... Sales (top line) - Profit (bottom line) etc.
It is always a "it depends" metric. Thus you always have to look deeper at a P&L to find out - or at least try to understand - how a business is doing. Some companies that are "new" -- let's use Faceybook as an example -- might just be judged on top line growth - because their expenses are going to be steep as a "start up"... but eventually they will be expected to produce a profit! A more mature company should be able to control their expenses and therefore, gains in top line should also be seen in the bottom line.
This is one reason that just basing a decision to buy or not buy on one metric is kind of foolish. P/E's (Price to Earnings ratio) are one of those metrics that are often sighted as being "too high" or perhaps "low" making the stock seem like a "value". I just don't think any single metric should be a basis for any decision. It's more like a good engine... it needs to be the sum total of all the parts and they need to be working together.