Skip to main content
Reading a CompanyLesson 5 of 5 · The numbers

Reading the numbers

Growth and momentum are not the same thing

Growth is what the business did; momentum is what the stock did. Pymia scores them in separate pillars so a good company in a drawdown is not mislabelled as a bad one.

7 min readBeginnerLast checked against the product on

Two clocks, deliberately separate

Growth metrics are computed from filings: revenue, earnings and free cash flow compounding over three or five fiscal years. They are backward-looking, audited, and slow.

Momentum is computed from prices: what the stock has done over the past year. It is forward-looking in the sense that markets are, unaudited, and fast.

Merging them into one "is this doing well?" number would be a category error. A business can compound revenue at 20% while its stock falls 40% because expectations were higher still. Both facts are true, and an investor needs them separately.

Why momentum skips the most recent month

The convention is called 12-1: the return over the past twelve months, excluding the most recent one.

That exclusion is not fussiness. Jegadeesh and Titman found that at the one-month horizon prices tend to reverse rather than continue, largely for microstructure reasons — bid-ask bounce, liquidity pressure from recent trading. Including the last month therefore mixes a reversal effect into a continuation signal and blunts both. Skipping it is the standard fix, and it is the convention Pymia's Momentum pillar uses.

The metrics in detail

  • Revenue CAGR (5y)

    Investopedia

    (Ending revenue ÷ Starting revenue)^(1/4) − 1

    Smooth annualized sales growth over five years. Lynch “ten-baggers” often showed sustained double-digit revenue CAGRs early in their run.

    Example

    Revenue grew from $2B to $3.6B over 4 intervals → CAGR ≈ 15.7%.

    One acquisition year can spike CAGR — read footnotes for organic vs inorganic growth.

    How to read it: Pymia Growth pillar uses revenue, EPS, and FCF CAGRs together — not revenue alone.

  • 12-month return (skip last month)

    Investopedia

    Price 21 trading days ago ÷ Price ~252 days ago − 1

    Academic momentum: winners tend to keep winning over 6–12 months, but the most recent month is skipped to reduce short-term reversal noise.

    Example

    Stock up 30% over the past year but flat in the last month → strong 12-1m momentum.

    Down 40% over the year → weak momentum pillar input.

    How to read it: Momentum is a trend signal, not a quality judgment — great businesses can have bad momentum after a scandal or rate shock.

  • % of 52-week high

    Investopedia

    Current price ÷ Highest close in last 252 trading days

    0.95 means trading within 5% of its yearly high; 0.50 means halfway off the peak. George & Hwang show anchoring near highs affects investor behavior.

    Example

    52-week high $100, current $92 → 92% of high (strong relative strength).

    High $100, current $55 → 55% (deep drawdown from peak).

    How to read it: New highs can reflect genuine strength or overheating — combine with valuation pillars.

  • Beta (β)

    Investopedia

    Covariance(stock, market) ÷ Variance(market)

    Historical sensitivity to the broad market. β ≈ 1 moves with the index; β above 1 amplifies swings; β below 1 is calmer (often utilities, staples).

    Example

    β = 1.4 → if the market rises 10%, this stock tended to move ~14% (and vice versa on down days).

    β = 0.6 → defensive tilt vs the S&P 500 over the estimation window.

    How to read it: Beta is backward-looking — business mix change (e.g. adding a volatile segment) may not be captured yet.

  • Dividend yield

    Investopedia

    Annual dividends per share ÷ Share price

    Cash income return from dividends alone, ignoring price appreciation. Very high yields sometimes signal distress (dividend cut risk).

    Example

    Pays $3/year in dividends, stock at $100 → 3% yield.

    Price falls to $50 with dividend unchanged → yield shows 6% — but the cut risk may have risen.

    How to read it: Pair yield with payout ratio and FCF coverage before treating high yield as “income safe.”

Growth without reinvestment is not compounding

A subtle trap: revenue growth is only valuable if the capital producing it earns more than it costs. Growth bought with capital earning 5% while the cost of capital is 9% destroys value, faster the more of it there is.

This is why growth alone does not lead PAS. It is a real signal that is easy to buy badly.

Momentum is the least comfortable metric here

It has no story. There is no accounting reason a stock that rose should keep rising, and the leading explanations are behavioural — investors underreact to news and then chase.

It is included because the evidence for it is unusually strong and unusually international, and because it is negatively correlated with value: the two tend to be right at different times, which is what makes holding both more stable than holding either. It is also the fastest-decaying signal on this page. A twelve-month-old momentum reading is not a stale value ratio; it is simply no longer the measurement.

Check yourself

4 questions. Nothing is recorded unless you are signed in, and nothing here affects anything else.

1. A business compounds revenue at 20% a year while its stock falls 40%. Which reading is right?
2. Why does the 12-1 momentum convention exclude the most recent month?
3. A company grows quickly, but the capital funding that growth earns 5% while capital costs 9%. What is the growth doing to the value of the business?
4. You find a strong momentum reading that was computed twelve months ago. How should you treat it?

4 questions left. An unanswered question counts as a miss, so the check waits for all of them.

Sources

Further reading