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hey welcome into the show this is everything money i'm seth this is paul we talk about financials companies we analyze stock real estate businesses today we're bringing you some information on our eight pillar analysis of how we look at a company when we're purchasing stocks mutual funds etfs yada yada we want to talk about revenue growth and why it's important this is our pillar number three we talk about pe on the show we talk about profit growth we talk about free cash flow not to be too confusing revenue growth it seems pretty simple concept but companies do grow in revenue how does that relate to their profit companies are losing revenue is their company still valuable all of this we'll talk about we'd like to show you two companies today they're drastically different one that's growing and one that's not microsoft versus blackberry both are very popular popular companies and have been for many many years paul is going to show us the breakdown of what revenue growth is why it matters and why it matters to you if you're going to purchase shares this company and become a shareholder so paul take it away baby maybe we should change blackberry from a popular to well-known i see it because by the way i loved my blackberry did you ever have never had one no oh i loved it you can market texas on red and until apple figures out how to do that and does it i will respect the blackberry messenger way more or blackberry just text in general way more so revenue growth you know revenue growth sounds very simplistic we always focus on profit with that with any sort of company whenever you look at anything what does it make what does it make how does it how much does it make but remember revenue growth is the driver of everything else right you know in our businesses upstairs you know we have seven or eight businesses upstairs i always tell our our employees our managers all stuff guys focus on revenue growth if there's it'll drive the profit if we have an issue with profit we'll let you know but in the meantime i only want you focusing on revenue growth because revenue at the end of the day is what's going to drive that bottom line and drive so many more efficiencies and things like that that you can get in the company okay i love seeing revenue growth i like seeing consistent revenue growth now does that mean that i'm going to pay whatever it takes to own a company that has revenue growth absolutely not and is the biggest mistake that a lot of investors make they'll sit there and say oh this company is growing i'm going to pay a ton of money for it then they end up overpaying the other side though is if you see a company that has very stagnant revenue or even declining revenue most people dismiss it very quickly for those exact reasons and it might be an opportunity to go in and do more research and see if you can still buy it and that's what we're gonna look at with our blackberry versus microsoft mod one of the most amazing things that happened to me the first time i ever realized i truly truly realized the disconnect between value and price was back in 2011 i remember looking at companies i started doing my eight pillars but on my own and i found microsoft and back then i was meeting with people who are in the tech business and they're like microsoft's dead it's going nowhere i can't believe you're buying it it was selling for about at a time 20 21 dollars a share i bought a lot of it i end up selling a 55 a share now it's a 260 265. everybody considers it's amazing company and the reason being by the reason i liked it so much look at this revenue growth this was consistent now this is from 2011 to now this was consistent though it just kept growing and growing and growing and i was like man oh there's a down year but growing and growing and i'm like how can a company be so dead yet their revenue was driving eight percent a year i didn't understand that and this is where you have to use this revenue model to understand if there's a disconnect between reality and perception the perception of microsoft was they literally the words this is a dying company was repeated to me over and over and they had yet to have a down year in revenue and i looked at it in 2011. i was like man imagine a world in which something's dying and the revenue is going up i brought this up too you know you you go to the mall uh when we were open and you'd see the microsoft store with a couple employees walking around by themselves and you head over to apple and there's literally a line out the door to buy these crazy items of course but then you have to understand the other side of the microsoft business which is they own microsoft windows and it's very difficult to switch from microsoft windows to something else it's a very sticky business they're growing their microsoft office they were doing a lot of other things i sat there and said man this just doesn't make sense now i think is the microsoft store's closed yet i i haven't been doing them all in a while nobody really goes to microsoft stores they were just trying to compete it looks it's basically a photocopy of apple in their own way fine but microsoft's business side is so so strong that even apple's not creating their own business software they still go to microsoft and say hey give us microsoft office so this is a big thing for me and i look at a company like microsoft i see this revenue growth in 10 years it's doubled for a company this large to double in 10 years that's a huge number does that mean you pay whatever it takes to get them no do i think microsoft's overpriced now ironically yes back in 2011 i was able to buy it for nine times earnings now it's like 35 times earnings so not only has the profit gone up the multiples have gone up but revenue growth is how i believe you can look at a company and say what is the trajectory where are they going and in an ideal world you'll find a company that's still growing or stagnant and everybody else thinks it's dead so that's the big thing about revenue growth there's no revenue growth in and of itself is not going to tell you whether you should buy a company or not buy a company it's it's one of the other it's one of the tools you use one of the metrics you use sit there and say what is this company doing right now what have they done what is the possibility for the future that's it but it's super important because the end of the day what drives the bottom line in profit is that revenue number as revenue goes up think about it logically if you were to have two companies and let's say you could buy two companies for ten dollars same price for both of them this is the revenue for each one it would be one two three four and the other one is one one one one which one are you gonna pay more money for the top one from probably because if they're the exact same company exact same margins everything this is going to have four times more revenue and probably over four times more profit and this one's gonna stay the same you should be willing to pay more for growth that's a big fundamental thing in value investing is factoring in growth into your assumptions it's a very everybody takes these um the world of investing in things oh it's so complicated take it simply your revenue is basically you at home how much money you bring in every single year from your job your expenses are all the other numbers but if you're if you know that you're going to make 10 times more money in 20 years than you today is your net worth going to be higher or lower lower 20 years from now higher of course no different for a company what about a company that's declining in revenue like blackboard blackberry so i bring up blackberry not because i'm like oh look there's a uh this is amazing i look at it and say okay but there's still value to the company so let's go to blackberry now blackberry if everybody remembers was the um the most popular phone probably in the 2000s before app before the iphone came out right is that correct yeah of course now ironically i want to show the stock chart for for blackberry about 60 a share back in 2011 and today it's at what's it at right now ten dollars nine dollars a share okay so it's down about um 85 now let's go look at their revenue the revenue went from 18 billion wow down to 900 million oh my gosh so it's about 90 90 down 95 down it's a big drop it just keeps going down and down and down by the way it was higher than that in 2000 in late 2000s so i'm looking at the saying now does that mean that if you could have bought a pair a share for a penny you shouldn't have bought it no of course not it's still a declining company but there's still going to be value in some way and you also want to look at it and say okay take people's perception of a revenue declining business and factor that in there a business declining in revenue can still make profit and still give a return to investors the question is are you overpaying or underpaying for that now i don't want to get in the net income aspect of things but a properly declining business that can still generate cash is still okay but it's but from a long-term perspective you got to keep that in mind with revenue and say if this revenue keeps declining at what point is it just going to go out of business there's still a value to something potentially if the revenue is going to zero use it to determine what that is now blackberry you saw it the stock price is down 95 or 90 whatever percent and the revenue sorry stock price is down 85 percent and the revenue and the revenue is down 90 90 whatever the number is it's a very large number but still it's around today it's still generating revenue and they're trying to rebuild their business into other aspects i actually know somebody who sells a blackberry and that's just hey listen they might make a comeback who knows what happens but the revenue is declining big time it can be scary the good news for an investor is when everybody else is scared maybe do a little more research and see what the potential is if this kind of analysis speaks to you and resonates with you uh obviously we we use our eight pillar analysis this is one of them to look at these companies we it's a real deep dive into the financials the charts might seem confusing to some folks but if you keep with this trust the process of learning this i guarantee you over the next few months you can be a more intelligent investor and follow our show we'll help you along uh if you ever want to join our patreon and you feel alone out there maybe in this investing process click the link below and join our patreon it's growing we started in november we have over 2 000 members and it's just incredible we do a lot of content for our patrons and so we'd certainly welcome you in if you're interested so that is our take on revenue growth and why it's important make sure you tickle the thumbs up on the way out thanks for [Music] watching bye