Why Sales and Earnings Growth is Important to a Stock's Performance

If you go back through the history of the stock market there is a recurring theme among those stocks which have had some of the strongest price appreciation and it's related to their Sales and Earnings Growth.   Companies which are exhibiting favorable Sales and Earnings Growth can still do well even in Bear Markets.

Here are a few examples of two companies which both experienced favorable Sales and Earnings Growth over the past year and performed well.

SCSS began to see its Sales Growth turnaround in the 4th Quarter of 2001 and exhibited double digit Sales Growth during 2002.  This was also reflected in the their Earnings Growth as well as shown by the table below. 

SCSS	3Q 01/00	4Q 01/00	1Q 02/01	2Q 02/01	3Q 02/01	4Q 02/01
% Chg Sales Growth	-6%	8%	24%	23%	33%	33%
% Chg Earnings Growth	103%	103%	120%	142%	900%	275%

Notice how SCSS completed the right side of a 2 year Cup last April and May and then developed a Handle for several weeks during the Summer months before breaking out on strong volume in September and October (point A).  Over the next several weeks SCSS rose from $6 to $12 a share for a gain of 100%.

Meanwhile USNA exhibited similar characteristics as it began to see both its Sales and Earnings Growth increase during 2002 as well.

USNA	3Q 01/00	4Q 01/00	1Q 02/01	2Q 02/01	3Q 02/01	4Q 02/01
% Chg Sales Growth	-3%	-3%	4%	12%	19%	33%
% Chg Earnings Growth	20%	17%	140%	220%	267%	357%

USNA completed the right side of a 2 1/2 year Cup last June and then proceeded to develop a Handle during the July through September period before breaking out in early October accompanied by strong volume (point B).  After breaking out in early October USNA then went from $7 to $19 a share over the next several weeks for a gain of 170%.

Thus by looking for those companies exhibiting good Sales and Earnings Growth which have developed a favorable chart pattern such as the "Cup and Handle" can still give investors decent opportunities even in a Bear Market environment.

This is what I do every week as I continue to look for stocks exhibiting similar characteristics as shown above as they will provide the best opportunities in the future.