Revenue
The total income a company generates from its business activities before any costs are deducted. The "top line" of the income statement.
Revenue is the total money a company earns from selling goods or services before any expenses are subtracted. It sits at the very top of the income statement, hence the nickname top line.
Revenue growth is the primary engine of stock appreciation. A company growing revenue at 30%+ per year will command a higher multiple than a flat-revenue business, even if the latter is more profitable today.
Analysts distinguish between organic revenue growth (internal business expansion) and inorganic growth (via acquisitions). Acquisitions inflate revenue but do not necessarily improve the underlying business quality.
Example
A SaaS company has 10,000 customers each paying $1,000/year in subscriptions. Annual revenue = $10 million. If it adds 2,000 net new customers next year, revenue grows to $12 million — 20% organic growth.
Related Terms
Book Value
Total assets minus total liabilities on the balance sheet — what shareholders would theoretically receive if the company were liquidated today.
IntermediateEarnings Report
A company's official quarterly disclosure of revenue, earnings, margins, and guidance. The biggest recurring event in single-stock trading.
BeginnerEnterprise Value (EV)
The total cost to acquire a business outright: market cap plus net debt. The true takeover price, capital-structure-neutral.
IntermediateEPS (Earnings Per Share)
Net income divided by shares outstanding. EPS is the single most-watched earnings metric for valuing a stock.
BeginnerFree Cash Flow
Operating cash flow minus capital expenditures. The actual cash a business generates after maintaining and growing its assets.
IntermediateOperating Margin
Operating income as a percentage of revenue. Shows how much profit the core business earns before interest and taxes.
IntermediateP/E Ratio
Share price divided by earnings per share. The P/E tells you how many dollars investors pay for each dollar of earnings.
BeginnerPrice-to-Sales (P/S) Ratio
Market cap divided by annual revenue. A valuation multiple that works even when a company has no earnings.
Intermediate