It’s the year’s biggest stock market showdown…

And it starts right now.

In one corner, we have a bull market that’s been going strong for the last 18 months.

Powered by massive breakthroughs in artificial intelligence (AI), this new bull market has propelled the S&P 500 to new all-time highs.

In the other corner, we’ve got serious structural headwinds. Inflation is still higher than it should be, which means interest rates are unlikely to come down anytime soon.

This news came as a serious blow to the “experts” who predicted we’d see upwards of five rate cuts to help boost the economy in 2024.

It’s enough of a shock to change investors’ outlook. They’ll be increasingly focused on revenue and growth in the stocks they own.

This means the current earnings season (which just kicked off with big banks last week) will become a critical turning point for many of the stocks in your portfolio.

Good thing I developed a tool to help with that…

Tracking Real-Time Growth With Green Zone Power Ratings

As passive investors, we’re obviously not privy to the board meetings and internal strategy discussed behind closed doors.

Instead, we’re limited to the information that the company publicly discloses in quarterly earnings reports. And there’s often a lot of “noise” that needs to be filtered out from this kind of short-term data.

Growth can vary from quarter to quarter or even year to year, based on where we are in the economic cycle. For a solid investment, we’re looking for something with more consistency and a long history of growth.

I designed Green Zone Power Ratings to distill all of this information into a simple, understandable number. Of course, knowing what’s going on in the background doesn’t hurt!

I can’t give you the secret sauce, per se, but I can give you an idea of what I’m talking about.

My Growth factor is a composite score made up of 18 subfactors. I look at growth in revenues, net income and earnings per share. And I use a variety of time frames, ranging from a single quarter to 10 years.

Tracking revenues, net income and earnings per share might seem redundant, but each has its place.

It starts with top-line revenue growth.

A company cannot sustain profits unless it grows its sales first.

Sure, cutting costs can boost earnings, even with flat or declining revenues — but only for a while. For sustainable earnings growth, you need a growing revenue stream supporting it.

All the same, revenue growth in the absence of earnings growth is nothing to get excited about. In fact, if revenues grow but net income doesn’t, that can be a sign of a company facing cutthroat competition and declining profitability.

We want net income to grow at least in tandem with revenues over time.

What about earnings per share … and how is that different from net income?

We calculate earnings per share by dividing net income by the number of shares.

If the company’s share count is stable, earnings per share should rise in line with net income.

However, share counts are not always stable. Companies issue new shares via secondary offerings or executive stock options and reduce their share counts with buybacks.

If I see earnings per share growing at a much slower pace than net income, that could be a sign of excessive share dilution and would make me think twice about buying the stock.

Of course, we can’t just stop there…

Growth Isn’t the Only Key

I’m a growth investor, and I love the challenge of looking for the next big mega trend. But I also know that investors can and often do overpay for growth.

That’s why my Green Zone Power Ratings system incorporates Growth as just one of six different factors to determine whether a stock will outperform the market.

But when it comes to determining a company’s future success … Growth is critical.

Growth can and will often surge higher before other factors do, just like it has with my latest Green Zone Fortunes recommendation…

It’s one of the world’s leading companies in the fast-growing niche of “Closed AI.” It’s a stock that Peter Thiel has called “the Next Google,” with a Growth score of 95 out of 100 and a Momentum score of 97 out of 100.

You can get all the details on the Tech Titan’s favorite stock HERE.

To good profits,

Adam O’Dell
Chief Investment Strategist