Growth stems from management
- Market's overall trend is increase upward at the rate of 10% a year
Good Management Characteristics
- High Pre-tax Profit margins
%Pre-tax Profit = (sales - costs) / sales
- Earnings on invested capital
Earnings on Invested capital = (net earnings) / (preferred stock + common stock + retained earnings)
Approaches
- Growth Industry Approach
- More Practical Approach, where you would look for companies increasing earnings and sales at
the rate of 10% or more.
Source:Starting and Running a Profitable Investment Club by
Thomas E. O'Hara & Kenneth S. Janke, SR
|
