Indeed, corporate sales figures are in many ways a more important measure than net earnings. A rising trend in revenues can serve as an excellent “heads up” indication that a company’s undervalued stock is about to turn up. Aside from internal sector momentum and price momentum, I consider sales momentum to be one of the most important things an equities trader should look at when evaluating a stock.
As it turns out, corporate revenues have risen appreciably during the last several quarters. According to Dr. Ed Yardeni (blog.yardeni.com), S&P 500 revenues per share bottomed during Q1-2009 and are up 30.2% through Q4-2012, and 5.9% year over year. Revenues for the S&P 500 Industrial Composite, which excludes Transportation, Financials, and Utilities, is up 42.4% over this same period, and 4.4% y/y. “Both measures are at record highs,” writes Yardeni, “and I am predicting that revenues will increase 5% this year and next year.”
Meanwhile forward revenues, the time-weighted average of these two forecasts, rose to a new cyclical high. The strong revenue trends show that this bull market is built on a solid base.