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Fire Your Stock Analyst!: Analyzing Stocks on Your Own by Harry Domash

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Chapter 12. Analysis Tool #9: Detecting Red Flags

Stock prices, in the end, reflect the markets’ earnings growth expectations for the underlying company, and all goes well as long as the firm continues to meet or beat expectations. But company executives face an impossible task. It’s mathematically impossible to maintain early-stage growth rates after sales reach a certain level. For example, Table 12-1 shows year-over-year sales growth rates for some recent super-growers.

Table 12-1. Year-over-year sales growth for recent high flyers (%).
Company20012000199919981997
Amazon.com1368169312825
eBay7492161108 
Priceline.com-51561300  

The funny part is, regardless of whether it is a single company or an entire industry experiencing super-fast growth, ...

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