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Value Investing in Growth Companies: How To Spot High Growth Businesses and Generate 40% to 400% Investment Returns by Rusmin Ang, Victor Chng

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Chapter 6

Numbers—The Third Piece of the Puzzle

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Numbers Do Not Lie

In the last two chapters, we taught you how to look out for a good business that is poised for rapid growth and appears to be on track for rapid expansion if it is managed by an experienced and competent team. Now it is time to study the third piece of the puzzle, financial numbers or performance, to confirm if the business and its management have a good track record. These are real results, generated in the past.

When looking at growth companies, it is very important to monitor their revenue and earnings. They are key metrics used to track the success of a growth company. Companies that are able to consistently increase sales and profits should increase shareholders’ value over time. It is important to know and understand these numbers, because they will help you understand how much profit the company is generating from its sales.

The fact is that the share price will, in the long run, reflect the growth of a company so long as it continues to deliver good results. This chapter will cover the fundamentals: numbers. Do note that we will not be going through the full accounts and its practices, that is, the rules and regulations (we leave these to regulators and accountants). However, as a value-growth investor, you will need to understand the basics of these accounting numbers and interpret these numbers from an ...

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