Module 2 of 8 in Fundamental analysis
Growth and quality of earnings
Measuring revenue and earnings growth properly, separating recurring profit from one-offs, and watching for shareholder dilution.
3 lessons in this module. Progress is saved in your browser as you go.
Growth is the number investors care most about and the one most easily flattered. This module shows how to measure growth over sensible periods, how to tell durable earnings from one-off gains, and how new share issues can shrink each shareholder's slice.
By the end of this module you should be able to
- Calculate and compare revenue and earnings growth rates over several years.
- Assess earnings quality using cash conversion, one-off items and accounting changes.
- Explain how share issues, convertible instruments and employee stock options dilute existing shareholders.
Lessons in order
Module test
10 questions, chosen at random from a bank of 30 questions and balanced across this module's learning goals and difficulty levels. Every question comes with an explanation. You need 80% to pass, and you can retake it as often as you like with a fresh set of questions.
This module builds on
- Compounding and CAGR: Multi-year growth is measured as a compound annual growth rate, explained there.
- Earnings per share: Growth per share uses earnings per share, which that lesson defines.
- The cash flow statement: Cash conversion compares profit with the operating cash flow shown in the cash flow statement.
- Operating profit, EBITDA and net profit: Separating recurring from one-off items starts from the profit levels that lesson explains.
- Why companies issue shares: That lesson explains why companies raise money by issuing shares in the first place.