The Analyst's Path

Glossarytaught in M2.05, M3.04

Revenue growth

Also called sales growth, topline growth.

The change in sales from one period to the next, and the most quoted and least decomposed number in company analysis.

Revenue rising from ₹4,200 crore to ₹4,800 crore is 14.3% growth.

Decomposition is where the information is. Growth is volume, price, mix, currency, acquisition or a change in accounting, and those six have very different implications for value. Volume growth in a business with operating leverage produces disproportionate profit. Price growth in an inflationary year may be no growth at all in real terms. Growth bought through acquisition consumed capital that has to earn a return.

Companies disclose enough to separate at least volume from price in most sectors, and the ones that don't have made a choice.

Before you extrapolate any of it, ask which of the six it is.

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