When it comes to the creation of shareholder wealth, there is much debate over growth metrics vs revenue (let alone profitability). I have no desire to tackle this argument here but I can tell you I like revenue and profitability. Too often companies that have developed great products and have paying customers still have an addiction to continuous equity injections to sustain operations.
If your company is experiencing any of the following symptoms, beware:
1) Yet another new CEO;
2) Not enough board room chairs for investors; and
3) Any round of financing beyond the letter "C".
We live in a world where a select group of technology companies can create significant value by simply leveraging their viral coefficient. For all the rest, revenues must grow and eventually lead to profitability or wealth creation never materializes. I recently experienced an exhilarating moment in a company's evolution from start-up. I have been a Director of Pure Technologies (TSX:PUR) for a number of years and on March 13th, the company announced its first ever dividend. The company's news release states, "We are generating strong free cash flow from our operations in addition to growing recurring revenues...we are pleased to be in a position where we can begin to return a portion of our free cash flow to our shareholders on a regular basis.This significant announcement reflects our confidence in our ability to enhance shareholder return while continuing with investments important to our growth."
What can one say about any company that delivers growth AND Yield. Wait for it..."Look Ma, No Hands!"
Author: Scott MacDonald