The Dangers Of Growing Too Quickly

Discussion in 'Stock Market Education' started by longtermbull, Apr 1, 2017.

  1. longtermbull

    longtermbull Administrator Staff Member

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    It may seem strange to suggest that there may be dangers associated with a company growing too quickly. After all, in a perfect world any company we invested in would significantly increase turnover and profitability in a very short space of time. Unfortunately, there are some rather nasty side-effects when a company is growing too quickly which can have a detrimental impact on the share price.

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  2. kirtimeliwal

    kirtimeliwal Senior Investor

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    When a company is growing too quickly then there might be some hidden reasons. It can be negative or positive both. For security, a trader should first analyse that company's profile and past performance in which you are going to invest your hard-earned money.


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  3. Chartman

    Chartman Senior Investor

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    Cash flow can be put at risk if a company is growing too quickly and offering credit to customers. Cash flow is the key to any successful business - whatever speed it is growing at.
     
  4. longtermbull

    longtermbull Administrator Staff Member

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    Cash flow should be protected first and foremost because there is no point having all of the orders in the world if you can’t fulfil them because of cash flow issues. We have seen many “high-growth” companies burning through cash at a phenomenal rate leading to the stereotypical crash and burn.
     
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