Both Grew 20%: A Video Case on Cash Flow, Dilution and Valuation
Both companies grew revenue by 20%. Would you stop at that headline? In our fictional A/B case, identical revenue growth and identical profit hide different cash-flow and per-share stories. Watch the 100-second walkthrough, then use the checklist below for your own research notes. Watch the video on YouTube The same headline, three different questions Fictional annual figures; USD; M = million Research check Company A Company B Revenue growth 20% 20% Net income $12M $12M Operating cash flow +$15M −$3M EPS growth 20% 0% Illustrative price / earnings 30× 18× First, investigate the cash-flow reconciliation. A gap between profit and operating cash flow calls for checking the explanation, including receivables, inventory and non-cash adjustments. It is not a verdict by itself. Second, inspect the share count. In the simplified example, B’s profit rises from $10M to $12M, while weighted-average common shares rise from 10M to 12M. Basic EPS stays at $1. A keeps 10M shares, so EPS rises...