All things being equal, share price is likely to increase in value at about the same rate that sales grow.
For dominant companies in major industries, an investor will want a sales growth rate of 5 to 7 percent.
Within a portfolio, look for an overall sales growth rate of at least 10% annually.
Earnings need not rise every year. Almost all industries operate in cycles, and any company can suffer a temporary setback.
But investors should be wary
- when a company's earnings and sales are erratic without explanation or
- when sales and earnings are slowly sinking and the company is not taking corrective action.