Course 404: Aggressive-Growth Stocks
Has Growth Hurt the Balance Sheet?
In this course
1 Introduction
2 Is Cash Flow in Line with Earnings?
3 Has Growth Hurt the Balance Sheet?
4 What Are the Trends in Growth Rates?
5 How Consistent Is the Company's Growth?
6 Are Free Cash Flows Positive or Negative?
7 How Much Does the Company Earn on Its Capital?
8 How Has the Stock Performed?
9 How Expensive Is It?
10 How Does the PEG Ratio Compare with Those of Similar Firms?
11 Conclusion: Knowing the Odds

Funding rapid growth by piling on debt is the riskiest way to expand. All growth companies hit bumps sooner or later, and it's important they maintain the financial muscle to absorb the shocks. Starbucks boasts this muscle, keeping its balance sheet in good shape despite its aggressive expansion. The firm reduced its financial leverage from 1.6 in 1997 to 1.3 in 1999, and shareholders' equity has increased 20% annually over the past three years (as opposed to 13% for the S&P 500).

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