Annual Earnings Growth

In addition to quarterly earnings, you want to make sure companies are showing strong long-term growth. I generally look for companies that have demonstrated growth by at least 20% for the last two years or more.

Why this aspect is important:

Companies can very easily cut their losses for 1 or 2 quarters by using short-term relief strategies. In addition, they can as quickly take other measures to boost earnings for a few quarters. This ends up masking the company's problems in terms of demand for its products, declining profit margins, or negative industry trends. For this reason, the company must have long-term annual growth.

According to Investors.com, "the 25% annual EPS growth is the minimum. The top stocks will often post even stronger increases. For example, Google's three-year annual earnings-per-share growth rate was 293% before it launched a five-fold gain starting in 2004."

Please keep in mind that this is strictly my analysis and opinion. Financial actions should not be based solely upon the opinions of this one article. Please read my disclaimer for further information.

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