- 1Revenue Growth = (Current Revenue - Prior Revenue) ÷ Prior Revenue × 100
- 2Organic growth (from operations) is more sustainable than acquisitive growth
- 3Growth rate naturally declines as companies get larger (law of large numbers)
- 4Compare growth to industry peers, not absolute benchmarks
- 5Revenue growth without margin improvement can destroy shareholder value
#What Is Revenue Growth?
Revenue growth (also called "top-line growth") measures how fast a company's total sales are expanding. It's the most basic measure of whether a business is getting bigger.
Revenue Growth = (Current Period Revenue - Prior Period Revenue) ÷ Prior Period Revenue × 100
If revenue grows from $10B to $12B, that's 20% growth.
#Types of Revenue Growth
Organic Growth
From existing operations — selling more products, entering new markets, raising prices. This is the highest-quality growth.
Acquisitive Growth
From buying other companies. Revenue jumps overnight, but the company paid for it. Check whether acquisitions create or destroy value.
Pricing vs. Volume
Revenue can grow by selling more units (volume) or charging more (pricing). Companies with pricing power have a competitive advantage.
#Revenue Growth Benchmarks
| Growth Rate | Category | Typical Companies |
|---|---|---|
| > 40% | Hypergrowth | Early-stage tech, disruptors |
| 20–40% | High growth | Successful SaaS, emerging leaders |
| 10–20% | Strong growth | Quality compounders |
| 5–10% | Moderate | Mature quality companies |
| 0–5% | Slow growth | Large-cap, GDP-type growth |
| Negative | Declining | Turnarounds or structural decline |
The law of large numbers: A $1B company growing 50% needs $500M in new revenue. A $100B company growing 50% needs $50B — an entire Fortune 500 company's worth.
#Revenue Growth Red Flags
1. Growing Revenue, Shrinking Margins
If a company grows 30% but margins drop from 15% to 5%, they may be "buying" revenue at unprofitable prices.
2. Revenue Growth >> Cash Flow Growth
If revenue surges but cash from operations doesn't follow, the company may be booking revenue it hasn't collected.
3. Acquisition-Fueled Growth Only
If all growth comes from acquisitions, organic demand may be stagnating.
4. One Customer Concentration
If 40% of revenue comes from one client, "growth" is fragile.
#How We Use Revenue Growth
In our 6-factor model, revenue growth is a key component of the Growth factor:
- Year-over-year revenue growth
- Combined with asset growth rate
- Weighted at 10% of the composite score
We believe growth matters but should be paired with profitability. Profitable growth creates value; unprofitable growth destroys it.
Last updated: February 5, 2026