Term · Profitability & Growth
Revenue Growth
In briefRevenue growth is the percentage change in revenue versus a prior period. It only becomes meaningful once broken down into organic, acquisition-driven and currency-driven growth and reconciled with margin and cash flow, especially for small caps with base effects.
Definition
Revenue growth measures the percentage change in revenue versus a prior period, usually year over year or quarter over quarter. It can be broken down into organic growth, acquisition-driven growth and currency effects. Only the combined view with margin and cash flow shows whether growth creates value.
How it is calculated
Formula. (revenue period − revenue prior period) ÷ revenue prior period × 100%
Why it matters for small caps
For small caps, reported revenue growth can be distorted by individual large orders, acquisitions or base effects, so breaking it down by source is decisive.
Common misreadings
- High revenue growth is equated with value creation, even though it can be margin- or cash-flow-destroying.
In the process
Frequently asked
Why break down revenue growth?
Because organic growth, acquisitions and currency effects have different value quality and must be assessed separately.
Is double-digit growth always good?
No. Growth that burdens the margin or cash flow disproportionately can destroy value rather than create it.
What is a base effect?
An unusually low or high prior period distorts the growth rate and feigns trends that do not exist.
Related terms
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.