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Strategies & Market Trends : Professional Equity Analysis - the Pursuit of True Value

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To: Louis Cornell who wrote (13)	1/25/1997 2:54:00 PM
From: Reginald Middleton	of 102

<t disagree on your de-emphasis on sales. Sales are the lifeblood of any company, and the primary measure that I use is sales growth.> I don't have a deemphasis on sales, it is just that it is far from an accurate measure of performance. Varying margins render slaes per share most inaccurate. If one really wants to compare sales of different companies, they should compare marginalized sales, or net revenue, which sort brings you back around to free cash flow. Many companies increase sales at the expense of value. Of particular note are the investment banks and brokerages, whose employees (compensated by bonuses on revenue) push revenue to the limit - eventhough the net return on the sales are not enough to cover the cost of the capital implemented in creating the revenue in the first place. Ex. Barings

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