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Turnover ratios, growth metrics, and the PEG ratio
Efficiency ratios measure how productively the business uses its capital base to generate revenue and cash. Growth metrics measure how fast it's expanding. Together they reveal whether revenue growth is creating real shareholder value or destroying it through capital absorption. A company growing revenue 30% while consuming 50% more capital each year is destroying value; a company growing revenue 15% while consuming 5% more capital is compounding wealth. The right combination — high growth + capital efficiency — is the structural source of the largest long-term returns.
Three core efficiency ratios. = Revenue ÷ Total Assets. Asset-light businesses (retail, services, software) run high; asset-heavy (utilities, industrials) run low. = COGS ÷ Average Inventory. Fast-moving consumer goods turn 10-20x; durable goods 4-8x. = DIO + DSO − DPO. Negative cycles (Amazon, Walmart, Costco) signal supplier-financed scale and bargaining power.
Growth quality matters more than growth rate. from selling more to existing or new customers is high quality. that masks flat organic growth is low quality and often value-destroying. Decelerating growth (40% → 30% → 20%) often signals market saturation or competitive pressure even though headline growth remains positive. Margin trajectory matters: revenue growing 15% with margins expanding 200bps is dramatically better than revenue growing 30% with margins compressing 200bps.
Amazon collects cash from customers within 1-2 days of a purchase but pays its suppliers (the manufacturers and brands behind the products) on 60-90 day terms. The result: Amazon's cash conversion cycle has run NEGATIVE for over 20 years. Each new dollar of revenue growth releases working capital rather than absorbing it — Amazon gets a small no-interest loan from its supplier base every time it grows. This structural feature has funded much of Amazon's expansion into adjacent markets (AWS, advertising, logistics) without requiring proportional external financing. Walmart and Costco operate similar models. The empirical result: companies with sustained negative cash conversion cycles plus high revenue growth have produced extraordinary long-term returns — the working-capital structure compounds with the revenue compounding. Source: Amazon 10-K filings; Walmart and Costco 10-K filings.
The Ratios tab computes asset turnover, inventory turnover, DSO, DPO, and cash conversion cycle over 10 years. The KPIs tab plots growth rates (revenue, gross profit, operating income, EPS, FCF) with peer-group benchmarks. The /screener page filters by growth rate, growth quality (organic vs total), and capital efficiency. The Insights tab segments revenue by source where companies disclose it (organic vs acquired, by segment, by geography).
Decelerating growth (40% → 30% → 20% over three years) often crashes the stock even though headline growth remains positive — the multiple compresses faster than earnings grow. Acquisition-fueled growth may mask flat or declining organic growth; read footnotes for organic-vs-acquired splits. Revenue doubling while losses triple is unsustainable; verify cash burn vs cash on hand for runway. PEG ratio breaks down at extreme growth rates (negative growth, 100%+ growth) — use it as one input, not a single-metric verdict.
What I look for is a company that's growing, but where the growth is real — organic, profitable, with margins expanding rather than compressing. PEG of 1.0 or below at a moderate growth rate is the kind of inefficiency the market sometimes offers, especially in companies just below the radar of large institutional investors.