How to Screen for Stocks With Great Sales

Every company has something to sell, whether it�s something concrete like Big Macs or F-150s, or something less tangible like advertising space or consulting services. And obviously, the best businesses are companies that sold more this year than they did last year.

Your at-a-glance way to assess whether a company is growing sales (also called simply �revenue�) is to access annual data via Google. Just input the ticker or stock you want — we�ll use Apple (NASDAQ:AAPL)�here as a practical example — then click on �Financials,� �Income Statement� and �Annual Data� in succession. Voila.

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Going back to Checklist Item 5 that referred to the importance of a dividend, now you get to see how Apple is vindicated on its decision to invest capital in itself instead of returning free cash to shareholders. Thanks to the newest incarnations of the iPhone and iPad, its sales have simply exploded in the past few years — with 2011 revenue up dramatically from 2010 to 2011, and almost triple 2008 numbers!

A Closer Look at Revenue

If your success story isn�t as obvious as Apple, which has shown tremendous growth each year like clockwork, the next step is to get a more granular breakdown. That involves quarter-by-quarter analysis, which can take some work.

For starters, it�s not as simple as comparing the first quarter of the year to the second quarter and then to the third. Growth isn�t always consistent thanks to seasonal changes. For instance, H&R Block�(NYSE:HRB) actually loses money for much of the year, then does a killing around tax time. So the fact that H&R Block swings from a loss one quarter to big profits the next is not a big deal. That�s a question of timing more than growth. Same for retailers that generate a huge chunk of change around the Christmas season; is it fair to compare summer sales to the holiday rush? Of course not.

This is why Wall Street likes to refer to �year-over-year� comparisons. Evaluating the exact same periods in different fiscal years allows you to consider the same seasonal conditions, without adjustments.

This year-over-year comparison normally is part of any quarterly report issued by a company. Take Apple�s first-quarter 2012 filing from January, which reads as follows:

�The Company posted record quarterly revenue of $46.33 billion and record quarterly net profit of $13.06 billion, or $13.87 per diluted share. These results compare to revenue of $26.74 billion and net quarterly profit of $6 billion, or $6.43 per diluted share, in the year-ago quarter.�

We�ll get to the profits part in the next chapter … but for now, just concentrate on the revenue.

Simple math tells you that $46 billion is a nearly 77% increase over $26 billion. Amazing — and that�s the same period of each year compared with each other, not skewed by seasonality.

I highly recommend you dive into quarterly reports for breakdowns like this beyond the yearly revenue totals easily accessible in Google Finance. It takes a little more legwork, but is highly worthwhile.

And what if a company has a bad quarter, year-over-year? It�s not the end of the world since it�s only one three-month stretch … but it�s important to at least acknowledge. Do a little more research and compare more results, perhaps from the past four quarters or even the past six quarters. Also keep in mind the longer-term trends as indicated by the full-year results in Google Finance.

Few companies are like Apple, with blowout revenue increases like clockwork. An occasional backslide in revenue happens. But if a company is losing ground in sales more often than gaining ground, the warning bells should be ringing.

How Do You Find Quarterly Revenue Results?

To find these quarterly reports, I use a few simple Google searches. First, I try to go to the company�s investor relations webpage, since that is the primary source. Just search for the company you�re looking for and the term �investor relations,� and you will find it easily enough.

After that, it�s up to you to find the reports. Every website is different, and some can be downright confusing. It�s a pain on occasion … but it�s always free. By law, each publicly traded company has to report and archive its revenue number in an investors relation section.

If you get frustrated poking around investor relations sites to no avail, don�t despair. You usually also can find the numbers second-hand via a broad Google search using specific terms — the company name, the fiscal year and the quarter I�m looking for in �QX� format, then the word �earnings.� In this case, I searched �Apple 2012 Q1 earnings.� Here are the results:

Want a different year or quarter or company? Just modify the formula accordingly.

Always look to a reputable source for the data to avoid any misinformation. Sometimes you get lucky — notice Apple.com appears here in the search results, so this is a jackpot because the search actually led you back to the primary source on the company�s investor relations page. Other times, you find results with trusted media outlets like the Associated Press, CNN, Reuters and Bloomberg.

Equally relevant are earnings roundups in blogs like the Huffington Post that link back to corporate press releases or high-class media outlets, which is a circuitous way to get you back to a trusted source if you don�t want to take the blogger�s word for it.

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This obviously takes time and some problem-solving skills, and each company and each report will present its own problems. But it�s tedious, not complicated, so don�t give up. Remember: This is 100% free, so you are saving money by spending your own time doing the research — and keep in mind that over time you will become more adept at searching the web for these numbers.

And most importantly, you have the satisfaction and peace of mind in knowing that your research is airtight and based on concrete figures.

A secondary benefit is that you also might pick up some other important information along the way as you sift through headlines and earnings reports

Check out a complete list of Investing 101 articles by Jeff Reeves for more on learning how to invest and pick stocks.

Don�t want to keep clicking? Then download the complete series of Jeff�s educational articles for just 99 cents via his e-book �The Frugal Investor�s Guide to Finding Great Stocks: 11 Free Resources to Help Beginners Identify Fantastic Investments.�

You can also buy a printed copy of �The Frugal Investor�s Guide� for $15.10 via online publisher Lulu.