Earnings growth drives valuation and revenue growth is the essential precursor for earnings growth. And owners of privately held companies aspired to the same growth rates, especially if they wanted to go public company or sell out to a public company.
Where is the growth bar today?
In a recent conversation with bankers from a major Wall Street firm, I asked that very question. Their answer: “anything in double digits.”
How times have changed. But some things have not changed - above average revenue and earnings growth rates are still the keys to above average valuations.
Management’s three financial priorities remain the same:
- Keep costs under control
- Manage cash carefully
- Plan for growth
Now is the time to set in motion those plans and strategies
which will drive growth and profitability when the economy emerges from
 “Any firm whose business generates significant positive cash flows or earnings, which increase at significantly faster rates than the overall economy. A growth company tends to have very profitable reinvestment opportunities for its own retained earnings. Thus, it typically pays little to no dividends to stockholders, opting instead to plow most or all of its profits back into its expanding business.” Investopedia at http://bit.ly/QIVRc
 Excludes companies that have not yet reached operating profitability.