I sold Impath in February 2001. By then, Impath was forecasting 30 percent sales growth for all of 2001, a strong number, but only half the previous year’s 62 percent figure, and thus a red flag.
Two years later Impath’s CEO quit in an accounting scandal and the company eventually filed for bankruptcy.
Growth stocks usually suffer big losses when current or forecast growth rates falter compared to historical values or to expectations. Successful growth investors must learn to recognize the danger signals and react before knowledge of the faltering growth becomes widespread.