You Should Care Only About Stock Performance, Not Revenue Growth
Posted by Timothy Sykes on Sun 16th of Dec, 2007 11:25:28 AM
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Since I’m about to start writing for AOL’s BloggingStocks.com, I’ve started reading some of the articles posted there. I’m not surprised to see a whole bunch of BullShip! Take for example this interview with IncrediMail’s (Nasdaq: MAIL) CEO. I won’t go into the details(because that’d give off the impression I actually care about this pathetic little company)—instead, let’s focus on this one quote:
“…Profitability will come. As I said, our focus is on revenue growth…”
OK, I understand, you’re trying to build a long-term business, you gotta invest in R&D, make deals that take time to ramp, etc, etc, but c’mon—profitability will come—that’s messed up! Is it any wonder your stock is right at a 52-week low, even as revenues are growing in excess of 75%? Is it any wonder that if I had a longer time horizon, I’d be much more likely to short this stock rather than buy it?
There are two lessons here: one for corporate management and one for investors.
TIM Lesson for Corporate Management: Hey, idiots, when you’re a publicly traded company, your long term vision, short-term profit sacrifice blah blah doesn’t matter! You build your business into a profitable machine, so your shareholders will be happy and won’t get rid of you.
TIM Lessons for Investors: Never buy into any company’s story, buy into a stock’s performance. When you buy into a stock and it doesn’t perform, you get out—there’s plenty of other stocks out there that are performing NOW.
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