Proof: Company Growth Valuations

GOALS

Prove that companies that are experiencing growth are valued at more than companies without growth by using third party sources that support the above statement, in order to build a research paper.

EARLY FINDINGS

  • The "Times-Revenue" method is a valuation process used to determine how much a company is worth based upon the business's revenues over a period of time. Investopedia states that a company with greater growth and expansion rates will likely have a higher times-revenue multiple, resulting in a more valuable business.
  • According to The Motley Fool, "Companies are most commonly valued via their earnings," and in order to compare company valuations, the best place to look at is a business's stocks, earnings per share (EPS), and price per earnings (P/E) ratio.
  • The P/E ratio of a company is equivalent to their stock price divided by their last four quarters' earnings combined. It is also considered to be equivalent to the rate of growth of a company's earnings per share, and thus represents growth (and value) effectively.
  • According to "The rule of 40," if the growth rate of a company is added to the profit margin and the sum is equivalent to 40% or more, then a company is considered to be successful and growing.

clarifications

1. What types of sources are you looking for? We understand you want "third-party sources," but in terms of source quality, what do you need? Scholarly articles? White papers? Business reports? News articles? Blogs? etc.

2. When you say company growth, what exactly do you mean here? In what way should a company be growing in order to correspond with their company value? In terms of revenue? Employees? Customer base? etc.

Proposed next steps:

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Initial findings regarding proof that company growth correlates positively to company value mostly focus on how a company is actually valued based on their growth rates, as well as other ways to measure and gauge growth. As a result, we suggest continuing with research to identify more proof from credible sources that state company growth does equate to company value, as well as further insights into why this is. If you choose to move forward with this option, please respond to the clarification questions above so that we can more precisely address your request.