How to look for sales acceleration | stockbee


How to look for sales acceleration

During the earnings season the focus is obviously on earnings. But really good and explosive opportunities can be found by focusing on young unknown companies that have gigantic sales acceleration.

A small company that starts growing sales rapidly will have rapid price increase even if the earnings are not great. This happens in case of new categories. For example if you have a company that has done say sales of 38 million last year and then this year it starts big sales acceleration and grows sales to 213 million and next year it becomes a 568 million company, what do you think will happen to the stock price.

These kind of extreme sales growth happen in new companies that come out with new product or service and that catches the public fancy. For example the figures I showed in paragraph above were for NTRI during the period of 2003 to 2005.  And as you can see in chart below during that period stock went up dramatically.

Similarly from 2003 to 2008 MNST grew from sales of 110 million to a billion dollar company. And as you can see in chart below during that period its stock price had explosive move.

When a company becomes a billion dollar plus company starting from small sales base you will find it will have dramatic share price appreciation.

The earnings season provides an opportunity to find such growth stories right at ground floor level, when they just start out to grow dramatically. Look for companies that start growing sales dramatically from small base. If a company grows sales to 100 million in quarter from a base below 20 million same quarter last year and if this is its first or second such big quarter then that is the stock to focus on.

I am always looking for companies likely to become a billion dollar company in 1 or 3 years from today. Only a handful of companies grow that dramatically in most years, but they are likely to be the explosive winners in market. In some market circumstances you will see lot many companies grow like this. This tends to happen in secular bullish trends like during the emerging market build up or during internet buildup era.

This kind of growth is also possible in consumer product or services. If a hot product or service catches on then it can quickly grow due to explosive consumer demand . For example CROX grew from 10 million sales to 800 million sales in 3 years or so once its product took off. The share price correspondingly multiplied many fold.

During the earnings season look for such sales outliers. They can make explosive moves. Especially if you have small account and want to grow it dramatically look for extreme sales/earnings growth situations. That gives you tremendous leverage.

If you have small account and looking to grow it dramatically make it your mission to find every such dramatic growth story. If you can just catch 3 to 5 such growth stories in next 3 years you will have big account.

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