Growth is the driver of future stock price
If your stock investment strategy involves identifying stocks you can hold over a long period of time, you will need to identify stocks of companies which offer the best growth opportunities. In such cases, focus on businesses that are expected to accelerate at a faster rate than their competitors, thereby generating, or having the ability to generate above-average earnings. Identifying growth drivers and coming up with financial projections is probably the hardest part of picking right investments.
To explain this point in detail, let’s continue with the same example of Bharat Forge. There are many growth drivers like – replacement demand pull up, pick up in infrastructure activity, low fuel prices, lower interest rate, healthy economic growth supporting company fundamental.
The company is placed well with a sustainable business model, sound financials and competitive advantage in positive industry scenario. In the case of Bharat Forge, it will be safe to say that the company has robust fundamentals and good growth drivers which will ensure that there will be sustainable growth in the future