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When Growth Slows… A Stock Dies


That’s the name of the game.

Price-earnings (PE) ratios, book value and all the other fundamental nonsense are essentially worthless.

(If you missed yesterday’s update on the right way to use PE ratios, click here now.)

Wall Street wants to see companies growing their sales and earnings…

It wants to see more dollars coming in the door

And as soon as the growth trend slows down, Wall Street is no longer interested.

It’s easy to guess what happens next…

They dump the stock.

Don’t believe me?

Let’s take a look at Beyond Meat (BYND) for a perfect example…

From Darling to Dud

After going public in early 2019, BYND quickly became a Wall Street darling.

Investors pushed it higher by a massive 432% in just three months.

Sales were surging, and investors expected that trend to continue.

Then, suddenly, the growth stopped…

Beyond Meat (BYND) Quarterly Revenue — Source: Chartr

Sales flat-lined.

The valuation models used by institutions were pricing in high double-digit growth every quarter.

That’s what justified such a high stock price.

But when those models were revised to reflect slower growth and lower expectations going forward, the stock began to appear highly overvalued.

So they sold it. Fast!

Weekly Chart of Beyond Meat (BYND) — Source: TC2000

BYND fell 70% from its highs almost as quickly as it shot up.

And those investors who bought into the hype are now sitting on large losses.

The Fundamentals That Matter

I’m not a fundamental trader by any means.

But I do recognize that sales and earnings growth are crucial.

The best-performing stocks will almost always post big sales and earnings numbers.

As soon as you see those numbers dip and fall short of expectations, start looking for the exit.

Remember… We want to date stocks, not marry them.

We only want to hang around for the good times.

Embrace the surge,

Ross Givens

Editor, Stock Surge Daily

Ross Givens
Ross Givens

I bought my first stock when I was 12 years old. It was Microsoft. I’ve been a registered financial advisor. I’ve worked as a stock broker. I ran a managed fund. I was a Vice President at JP Morgan with Series 7, Series 66 and Series 3 securities licenses. I’ve been featured on Fox Business, CNBC, Bloomberg, and a bunch of other networks. The only thing I enjoy more than making money, is helping YOU make money.

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