Sustainable Growth Rate - SGR

The company's swear word mug was a hit in the U.S. It had $1 a share in earnings last quarter. Then, in a 5-week period, it released the mug in multiple languages in 36 countries, where it was also a huge hit. That next quarter, it had $3 in earnings. So some genius analyst on Wall Street wrote a report claiming, "At this rate of growth, the company could produce $5 then $7 in earnings this year, then $9 and $11 and $13 and $15 next year, to then earn $48 a share next year. At 25x that number with some discounting, it could trade for $1,000 a share."

Ok, so clearly the big growth rate was just a blip. It was not sustainable as a growth rate. In fact, the company would have been happy to just not shrink in subsequent quarters for a while, until it came up with new swear words and new languages to put on their internationally distributed mugs. So maybe $3 a share was sustainable; $15 was not.

Next year: Klingon.