If the outstanding shares do not change much over time, there are no problems in looking at growth in Revenue, Net Income or Cash Flow or Revenue per Share, EPS or Cash Flow per Share. Changes outstanding shares are neither good nor bad. However depending on whether the outstanding shares are increasing or decreasing determines where you should look to see if the company is really growing or not.
If the outstanding shares are decreasing, you have look past the per share value to look at the company’s growth. If share are decreasing, things like Revenue per Share, EPS and CFPS might look good, but you really need to look at Revenue, Net Income and Cash Flow to determine if the company is really growing.
The problem is when Revenue, Net Income and Cash Flow are showing low to negative growth and Revenue per Share, EPS and CFPS is showing good growth. In this case a company is really not growing if there is low to negative growth in Revenue, Net Income and Cash Flow. Sometimes companies will do share buy backs to make the growth in EPS look better.
If the outstanding shares are increasing, then per share values will tell you if the company is growing or not. Here you have to look at Revenue per Share, EPS and CFPS. You have the opposite problem here. A company is really not growing if Revenue per Share, EPS and CFPS is not growing.
On my other blog I am today writing about Goodfellow Inc. (TSX-GDL, OTC- GFELF) ... continue...
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