How Fast Should You Expect Today's High-Flying Companies to Grow?

by: SA Editor Rocco Pendola

The seemingly outrageous claim made by a representative of Green Automotive (OTCPK:GACR) that the development stage company would generate revenue of more than one billion dollars in 2012 got me thinking. While I don't believe most Seeking Alpha readers will even consider investing in Green Automotive or other similar Pink Sheets stocks, many are playing and may play more relevant and heavily-hyped high flyers.

In this article, I look at how several, long-established big-name stocks have grown revenues since their inception. I compare them to the early financial results of some of today's relative newcomers. I fully realize that, in many ways, I make apples to oranges to plums comparisons. Unique circumstances -- ranging from time-specific market conditions to the nature of a firm's business -- dictate how fast and by how much they grow. This review should still prove instructive, providing at least a bit more insight into what to expect from stocks colored with loads of potential.

In Green Automotive's response to my recent articles, it lists no revenues for the period April 28, 2009 to March 31, 2011. You can confirm this in the company's latest official OTC Markets' filing. Therefore, if we use one dollar's worth of revenue for 2011, achieving $1 billion in 2012 would represent an incredible 99,999,999,900% increase year-over-year. That's quite a debut. Let's even assume that somehow the company produces $100 million in revenue for the remainder of 2011; an increase to $1 billion next year would equal year-over-year growth of 900%.

Stepping firmly back into reality, I put Google (NASDAQ:GOOG) first on my list. Then, minus any particular science, I selected other multi-billion dollar companies. I checked to see how they fared revenue-wise in each of their first four years of reporting as a public company. I compare those results to revenues in each of the last two years.

It is important to note that I only track each company's beginnings as a public entity. For instance, Google was privately held for several years before going public in 2004. While not entirely impossible, It would have been somewhat difficult and time-consuming to generate revenue figures from the early days of some of the following companies. It is safe to assume, however, that each firm's revenues, by and large, were considerably lower when private, grew year-over-year while private, and continued to increase as they went public. As such, the purpose of this table is not to compare revenue growth between companies. Rather, it is to show the pace at which each firm achieved revenue growth in an attempt to help inform expectations related to today's big names that could very well become the "next Google."

Company Name


Year 1 Rev Year 2 Rev

Yr 1

to Yr 2

Rev % Growth

Year 3 Rev Year 4 Rev 2009 Rev 2010 Rev
Google (GOOG) $86.4M $439.5M 409% $1.5B $3.2B $23.7B $29.3B
Apple (NASDAQ:AAPL) $335M $583M 74% $983M $1.5B $42.9B $65.2B
Microsoft (NASDAQ:MSFT) $197.5M $345.9M 75% $590.8M $804.5M $58.4B $62.5B
Amazon (NASDAQ:AMZN) $147.8M $609.8M 313% $1.6B $2.8B $24.5B $34.2B
Click to enlarge

*Data compiled from SEC Filings and each company's investor relations website when possible

I had fun compiling this data. It would be easy to excuse people like Steve Jobs and Jeff Bezos if they have huge egos; what they have accomplished is nothing short of incredible. It sounds cheesy, but I cannot imagine the emotion they must feel when looking over the financial paths their respective companies have taken. It gives me chills. Of course, they're too busy navigating the business today to do much savoring of what they did in the past.

What's even more amazing is getting your head around this statistic: Google, Apple, Microsoft, and combined to take in $191.2 billion in revenue in 2010.

Many investors are on the lookout for the company that will become the next Google, Apple, Microsoft, or I considered several young, prolific companies that could reach that status. With the exception of Pandora (NYSE:P), each company has already gone IPO. I cull revenues from the most recent years of official SEC filings, available at the SEC's website.

Company Name (Ticker) 2008 Rev 2009 Rev 2010 Rev % rev growth needed to reach $1B in 2011
Pandora (P) $19.3M $55.2M $137.8M 626%
LinkedIn (NYSE:LNKD) $78.8M $120.1M $243.1M 311%
Tesla (NASDAQ:TSLA) $14.7M $111.9M $116.7M 757%
Zipcar (ZIP) $106.0M $131.2M $186.1M 437%
Demand Media (DMD) $170.3M $198.5M $253.0M 295%
Click to enlarge

Interestingly, Demand Media sits closest to the $1 billion marker. It's not as much of a surprise that Pandora and LinkedIn appear most likely to get there first, given the pace of their most recent year-over-year revenue growth.

To elevate and realistically expect to sustain high-flyer status, it's safe to assume that these companies must crack that $1 billion bar over the next couple-to-a-few years. Each is on that torrid pace of increasing revenues alongside increasing costs and expenses. The following table shows by how much each side of the ledger grew between the most recent quarter in 2011 and the same quarter in 2010. I used each company's most recent SEC filings to gather the data.

Company Name Year-over-year quarterly rev growth Year-over-year quarterly cost & expenses growth
Pandora 136% 130%
LinkedIn 110% 123%
Tesla 136% 119%
Zipcar 48% 42%
Demand Media 48% 47%
Click to enlarge

In recent Seeking Alpha articles, I place focus on two key criteria I intend to use when I evaluate a company's investment prospects:

  1. Do they presently exploit or have the ability to create internal and external synergies?
  2. Do they have multiple revenue streams (e.g., AAPL, AMZN, GOOG, MSFT)?

In other articles, I have discussed these and related issues as they pertain to Tesla and Demand Media. In future articles, I will dig deeper into synergy and revenue streams vis-a-vis not only Tesla and Demand, but Pandora, LinkedIn, Zipcar, and other companies. I hope that leaving things open a bit will trigger a solid discussion in the comments section of this article and lay the groundwork for the forthcoming writeups.

The following table provides a snapshot of how I see each company stacking up in the two aforementioned areas.

Company Name Internal Synergy* External Synergy Multiple Revenue Streams*,**
Pandora No Limited Not yet
LinkedIn Yes Yes Yes
Tesla No Yes Yes
Zipcar No No No
Demand Media Yes Yes Yes
Click to enlarge

*I do not count domestic and international operating segments as synergy or multiple revenue streams.

**Because subscriptions make up such a small part of Pandora's revenues relative to advertising, I do not count them as contributing, as of yet, to meaningful multiple revenue streams.

Disclosure: I am long TSLA.

Additional disclosure: I may initiate a position in AAPL or DMD at any time.