Course 405: Classic-Growth Stocks
Where Is Growth Coming From?
In this course
1 Introduction
2 How Fast Has It Been Growing?
3 What Are the Trends in Growth Rates?
4 Where Is Growth Coming From?
5 Is Profitability Keeping Pace with Growth?
6 What Is the Company Doing with Its Profits?
7 Is the Company's Debt Leverage Increasing?
8 How Has the Stock Performed?
9 How Do the Stock's Price Valuations Compare with Those of Similar Firms?
10 Conclusion: Quality versus Price

Because classic-growth companies tend to have one or more businesses that are well established and mature, it is important to look at what segments are driving growth. It is possible that the mature segments are stagnating and that newer areas are responsible for overall growth rates. A less broad-based growth can make for a riskier investment, with the company's performance depending on the strength of relatively untried businesses. Worse, if the mature segments enter a decline, the growing businesses may not have enough size or horsepower to compensate. McDonald's growth is uneven. Over the past three years, overseas sales have accounted for an increasingly large portion of the company's overall revenues. The shift is even more marked in the breakdown of operating income. However, McDonald's still looks like it's in good shape. Even though growth rates may not be uniform across regions, a glance at the annual report shows that the comparatively slow-growing U.S. operations are still expanding at a respectable clip of around 5% per year. But McDonald's international business has been doing even better, with revenues rising by about 10% to 15% every year. Also, overseas operations now account for well over half of total revenues, so McDonald's slower growing segment has less effect on the company's overall growth.

Next: Is Profitability Keeping Pace with Growth? >>


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