Course 403: Speculative-Growth Stocks
Is Sales Growth Outpacing Asset Growth?
In this course
1 Introduction
2 Is Sales Growth Outpacing Asset Growth?
3 What's the Growth Trend?
4 Are Net Margins on the Rise?
5 Is the Business Generating Cash?
6 What Has Growth Done to the Balance Sheet?
7 How Has the Stock Performed?
8 Is it Fairly Valued?
9 Conclusion: Numbers Matter

The speculative-growth market is full of companies that are doubling their sales by doubling their assets. This is a legitimate way to expand. Investors pour additional capital into the business, which drums up new sales. Eventually (we hope), the company reaches a critical mass at which it becomes a big moneymaker. But to limit risk, we can focus on companies that are making more efficient use of their assets as they expand, generating rising sales on each $1 of capital. Yahoo has done pretty well on this front. Between 1997 and 1998, its sales grew 189%, but its assets grew even faster, at 333%. In 1999, though, Yahoo's sales started to grow faster than its assets, indicating that it's starting to squeeze more growth out of its assets. That tells us that Yahoo is growing quickly, but prudently.

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