1. Revenue: The Growth Engine
Revenue is a company’s total income from sales before any expenses are subtracted—think of it as the raw horsepower of the business. If revenue’s climbing 10% or more year-over-year, it’s a sign customers want what they’re selling. Stagnant or shrinking revenue? That’s a red flag—demand might be drying up.
For example, a tech firm posting $100M in sales this year and $110M next year hits that 10% mark. Check their income statement (usually in quarterly or annual reports) and look at trends over 3-5 years. One good year isn’t enough—consistency is key. Watch out for revenue boosted by one-time events (like selling a division); it’s not sustainable growth.
2. Profit: The Bottom Line That Counts
Profit—specifically net income—is what’s left after all expenses, taxes, and costs are paid. Revenue might look good, but profit shows if the company can actually make money. A 10%+ annual increase here means they’re not just growing sales—they’re managing costs and staying efficient.
Say a retailer earns $10M in profit this year and $11M next—that’s your 10% growth. Dive into the income statement again. Look beyond the headline number: Are profits up because of a tax break or a real business improvement? Consistent profit growth over years signals a company that’s not just surviving but thriving.
3. Free Cash Flow (FCF): The Lifeblood of Flexibility
Free Cash Flow is the cash a company generates after covering operating expenses and capital expenditures (like buying equipment). It’s the money they can use to pay dividends, buy back shares, or fund new projects. A 10%+ yearly rise in FCF shows they’re not just profitable on paper—they’ve got usable cash to keep growing.
Imagine a manufacturer with $20M in FCF this year and $22M next—solid 10% growth. Find FCF in the cash flow statement. Compare it to net income: If FCF lags way behind profit, they might be cooking the books or stuck with uncollectible sales. Strong FCF growth means resilience and room to maneuver, even in tough times.
4. Book Value Per Share (BVPS): The Safety Net
BVPS measures a company’s net worth (assets minus liabilities) divided by the number of shares outstanding. It’s what shareholders might theoretically get if the company shut down and sold everything. A 10%+ annual increase suggests the business is building value—assets are growing faster than debt.
For instance, if BVPS jumps from $50 to $55 per share in a year, that’s 10%. Check the balance sheet for total equity and divide by shares outstanding (both in annual reports). A rising BVPS can mean retained earnings are piling up or assets are appreciating. But beware: If it’s driven by issuing new shares, not real growth, it’s a mirage.
5. Return on Invested Capital (ROIC): The Efficiency Champ
ROIC shows how well a company uses its money—both equity and debt—to generate profit. It’s calculated as net operating profit after taxes divided by total invested capital. A 10%+ annual growth in ROIC means they’re getting better at turning every dollar into earnings, a hallmark of a well-run business.
Suppose a company’s ROIC rises from 15% to 16.5%—that’s 10% growth in efficiency. You’ll need to dig into financials: Look at operating profit (from the income statement) and invested capital (debt plus equity, from the balance sheet). High and rising ROIC separates the elite from the mediocre—think of it as a company’s batting average.
Why 10% Growth Matters
Why set the bar at 10%? It’s a sweet spot. It outpaces inflation (typically 2-3%), beats average market returns (around 7-8% historically), and shows a company’s got momentum. A stock hitting 10%+ growth across all five KPIs isn’t just good—it’s exceptional.
How to Use This
Start with a company’s financial statements (available on their investor relations page or SEC filings like 10-Ks). Look at 3-5 years of data for each KPI. Calculate the year-over-year percentage change—does it hit 10% consistently? Cross-check with industry averages; a 10% grower in a shrinking sector is gold. And don’t sleep on qualitative stuff—management, competition, market trends—but let these numbers be your anchor.
The Bottom Line
Finding a stock with 10%+ growth in Revenue, Profit, FCF, BVPS, and ROIC is like finding a unicorn: rare, but they exist. It takes work to sift through the noise, but the payoff is a portfolio built on fundamentals, not hype. Numbers don’t lie—start digging.
