One benchmark we like for growth stocks

Simon Bonouvrie

Key factors for assessing how far and fast a company can grow include; examining both the organic and acquisition opportunities available to it and the attractiveness of the industry that the it operates i.e. is the industry-high growth and is the company in a position to exploit this opportunity now and in the future. What is the track record of management and have they had previous success within the industry at managing and growing a successful enterprise. Does the company have a strong balance sheet and strong cash flow to enable the company to invest for the medium to longer term and support the company's growth? What is the company's forecast revenue and earnings growth rate within the next several years and beyond? A good benchmarking metric for growth stocks is to look at the PEG ratio, which is the PE ratio divided by the growth rate. A PEG of less than one usually means the company is attractively valued relative to its forecast earnings growth rate.


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