The essential growth-vs-profitability metric for software stocks
Thank you
How do we know which phase or stage of a company's development cycle it is in? Is there a rule or formula for diagnosing this?
That’s a great question—and while there’s no one-size-fits-all formula, here are a few signs to look for:
📈 Early stage: Fast revenue growth, heavy R&D and marketing spend. Think product-market fit and scaling.
💰 Mid-stage: Growth normalizes, but margins improve. Operating leverage starts kicking in.
🏦 Mature stage: Slower growth, strong free cash flow, consistent dividends or buybacks. Focus shifts to efficiency.
The key is watching the growth vs. profitability tradeoff—and tracking how the company talks about its priorities over time.
Inspired
Thank you
How do we know which phase or stage of a company's development cycle it is in? Is there a rule or formula for diagnosing this?
That’s a great question—and while there’s no one-size-fits-all formula, here are a few signs to look for:
📈 Early stage: Fast revenue growth, heavy R&D and marketing spend. Think product-market fit and scaling.
💰 Mid-stage: Growth normalizes, but margins improve. Operating leverage starts kicking in.
🏦 Mature stage: Slower growth, strong free cash flow, consistent dividends or buybacks. Focus shifts to efficiency.
The key is watching the growth vs. profitability tradeoff—and tracking how the company talks about its priorities over time.
Inspired