Sales growth
Revenue Growth
Sales growth is the percentage increase in a company's revenue over a period. Compared across one, three, and five years it shows whether the business is accelerating, steady, or shrinking.
Formula
One year growth
Sales Growth (%) = (Sales This Year − Sales Last Year) ÷ Sales Last Year × 100
Multi-year average (CAGR)
Sales CAGR (%) = ((Sales in Final Year ÷ Sales in Base Year) ^ (1 ÷ Years) − 1) × 100
Benchmark: Must be present; read the 1, 3, and 5 year figures together
Reading the number
Sales growth is listed in the notes as an essential check in its own right, alongside profit growth. Profit can be manufactured for a year or two by cutting costs or booking one-off income. Sales cannot grow for long unless customers are buying more. A company whose profit is growing while sales are flat is squeezing margin, which has a limit.
The three-window reading matters most. Growth accelerating from the five year average to the three year average to the latest year is the pattern that justifies a rising valuation. Decelerating growth with a still-high PE is the pattern that precedes a de-rating. Sales growth also settles the asset turnover question: a fall in turnover with negative sales growth is a demand problem, not a new-plant effect.
Indian example
Related ratios
Glossary terms
Go deeper
From the research
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