Why judge a company’s health based on revenue growth rather than other measures of corporate performance?
Revenue growth is the primary driver of long-term corporate performance. This is not to say that revenue growth without profits is desirable, but to suggest that high growth through margin management alone is not sustainable. It is also more difficult to “engineer” or manipulate the top line over time. By contrast, market value and profit measures are much more variable. Deflating market capitalization by an underlying index can eliminate some, but not all, of this variability; and as for profit, the combined effect of one-time charges, changes in accounting rules, and the inevitable short-term manipulations make for numerous peaks and valleys.
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