Sales Growth

The first and most reliable measure of growth is the rate of growth of sales. The effects of acquisitions or divestitures of other companies or parts of other companies frequently distort even this measure. The accounting process provides for the restatement of earlier years numbers for the effect of the acquisition or divestiture, but it represents the accountant’s and management’s judgement of what the new company would have looked like if the change had been in effect one year ago.

There is a positive bias installed in the numbers from restated data. If the management has an opportunity to restate earlier numbers there is a tendency for kitchen sink-like costs to appear last year to make this year look its best.

We maintain our data on an as-reported basis. We are interested in what the market knew last year and what it knows now and where the differences are. Our measure of sales growth on a year over year and as-reported basis may differ from the restated numbers on the current SEC filing 10Q.

Sales growth is also very volatile. Even with seasonal effects removed, it is not unusual for sales growth to vary widely cross companies and also over time. None-the-less, the only long-term driver of growth is the rate of growth of sales. All other influences are temporary.

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