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QuestionsCategory: Financials QuadrantRevenue decrease, but net income and net profit margin have been growing steadily
Charles Tan asked 6 years ago

Hi, would like to what if the past financial years the the revenue growth of the company hasn’t been growing, however the net profit margin and net earnings had been showing steady growth (healthy). Is the company still worth investing? or because of the declining in revenue then we should not consider in the company anymore?
 
Thank You

1 Answers
Victor Chng answered 6 years ago

Hi Charles,
 
Companies with declining revenue and increasing profit are generally having low quality earnings. In order for profit to increase, the company must have growing revenue. Growing profit by cost cutting will not last and the profit growth will eventually slow down.