Most people may agree with this statement and believe higher growth is always good. However, this is not always true! Are higher revenue growth rates always good – as in does higher revenue growth always lead to higher valuation?
No, not so. Higher growth rates are good only when the company also has positive operating cash flow margins or, more specifically, positive unit economics. Note that I am not stating positive income.
If a company does NOT have positive operating cash flow margins or more specifically positive unit economics. The company will be destroying more value with higher growth. Conversely, higher growth rates with negative cash flow margins lead to negative valuation!
An example may be Amazon. It has negative margins for many years. However, it had positive unit economics or believed it could gain positive unit economics at scale.