Unveiling Market Leaders: Why Revenue Growth Above Industry Average is a Great Sign.

Table of Contents

1. Why this matters

2. How to find out if a company is growing faster than the industry?

   1. on Company level : Fortinet & the Cybersecurity Industry

   2. on Business Segment level : Microsoft Azure & the Public Cloud Industry

Disclaimer: This communication is provided for information purposes only and is not intended as a recommendation or a solicitation to buy, sell or hold any investment product. Readers are solely responsible for their own investment decisions.

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In our quest to build a winning stock portfolio, we need to identify companies with the potential for solid growth.

Today, we'll delve into a key indicator:

Comparing: company's revenue growth rate VS Industry growth rate

Why this matters:

Companies exceeding their industry's growth rate are likely doing something special. Here's why this is a potential sign of a strong investment:

• Market Share Capture:  A revenue growth rate that outpaces the industry suggests the company is taking market share from competitors.

  • This indicates

Where to find these info?

i) On Company level

Using Fortinet as an example,

First, you would need to identify the Revenue Growth % of the company,

This can be obtained from a site like stockanalysis.com

Fortinet's latest Annual Revenue Growth Rate is reported to be 20%

Next, you will need to compare this with its Industry Growth rate,

you can find this information on sites like Statista.com's Market Insights

You can see the Cybersecurity is expected to grow at a CAGR of 11% for the next few years.

Hence this is a sign that Fortinet has been capturing market share from its peers in the industry, since their Revenue growth rate outpace the industry's growth rate as a whole.

Fortinet's average Revenue Growth rate in the past decade has been about 24%.

i) On Business Segment level

You can also analyse a company's segment potential using this method.

For example,

Microsoft's Intelligent Cloud Segment has risen to be Microsoft's highest contributing Revenue (& Operating Income) generator.

Microsoft's Intelligent Cloud Segment Revenue along the years (source:stock-analysis-on.net)

As an investor it would make sense to analyse how well have they been doing compared to the Industry rate.

So the first step would be to find out the growth rate of Microsoft's Intelligent Cloud Segment,

You can find these info on their Financial reports:

(source: Microsoft 2023 Annual Report)

Next, compare it with the Industry Growth Rate, one of them being Public Cloud

The Public Cloud industry is expected to grow at a CAGR of 11% for the next few years. (source: Statista)

This also shows that Microsoft's Intelligent Cloud segment is capturing market share since they are growing faster than the Industry, which is a good sign.

Remember: 

High revenue growth isn't the only factor to consider. We'll explore other aspects of company evaluation in future posts. But for now, keep an eye out for companies exceeding their industry's growth rate – it could be a sign of a future champion in your portfolio!

Stay tuned for the next chapter in our guide to building a winning stock portfolio!