Growth Leads To Value Creation

Ruzbeh J Bodhanwala and Shernaz Bodhanwala talk about the fast growing sectors where your money can grow faster

- Ruzbeh J Bodhanwala and Shernaz Bodhanwala

Value-investing is an art of arriving at the value of company using its future cash flows. One of the cornerstones of business valuation is growth. When an analyst makes a model of the company for calculating its value the backbone of the model is the assumption of growth. Industry also gives weightage to the analyst who predicts more accurately than others. In this article we will focus on industries which are showing more growth in terms of revenue and earnings as we can expect these industries to do better in the future.

Revenue growth is the key but if the revenue growth does not translate into earnings growth then it does not benefit the shareholder. We constantly hear COO, CFO talking of plans to increase the revenue and if they are suspecting growth to be lower than we would see an immediate reaction to the news. Management of few companies do share guidance numbers on expected revenue and earnings this avoids any earnings surprises when the quarterly results are disclosed.