No. of Recommendations: 1
(LG: I am copying Clientserver's post #246 below, so I can interact with it. 
My comments will be in italics.
Here's his post:


Do you consider whether the growth rates are increasing or 
decreasing ? Wouldn't a decreasing growth rate indicate that these 
growth rates are not sustainable?

(LG: Absolutely correct. You are using revenue growth rates below, 
which is the most helpful R.O.G., since the earnings R.O.G. have two 
strikes against them, in the three portals particularly: either 
(1) they are uncalculable because they are coming from a loss to a 
gain, or (2) they are coming from a tiny gain to a big gain (like
1437% increase) which is basically meaningless. 
Rarely are such earnings growth rates sustainable, and 9 times out of 10, 
you should plan on a decrease next quarter -- and this would apply to
revenues as well.) 

I just checked the growth rates of the companies that you had 
posted. I couldn't find data for all quarters for SINA. (LG: Yes, and 
my SINA figures are still at home. They look about like SOHU if I remember 
right) I have included OVTI in the list. This compares quarterly
revenue growth yoy for the last 5 quarters. 1Q yoy growth is the most 
recent quarter, 2Q yoy is the previous quarter etc.

(LG: And what a variation! We have stocks with a R.O.G. increase every 
quarter, almost every quarter, steady and solid, and decreasing every 
quarter (except one) -- but the one that has decreased almost every quarter
still has the highest rate of growth. So what is a forecaster to do?) 

                  NTE(1)   OVTI(2)   SOHU(3)  UTSI(4)    NTES(5)
1Q yoy growth      123       204       215       75       254
2Q yoy growth       72       206       218       80       393
3Q yoy growth       13        77       157       52       813
4Q yoy growth       -4        50       110       55       943
5Q yoy growth       -6        40       113       65       638

Though NTES has the best yoy growth rate in the list, its growth
rate has been falling for the past 4 quarters. A growth rate of 943%
probably was not sustainable. (LG: An understatement to be sure!) 
SOHU on the other hand, has an increasing growth rate over the past 5 quarters.

So, for "rate of growth rate", NTE is on the top of the list followed 

(LG: This is why computer programs and Excel functions are not very
good at predicting. There are variables that lay outside the numbers,
and there are NUMBERS that lay outside the numbers above. By the latter
I mean sequential Q2Q rate of growth. Sometimes there are additional
patterns that show up sequentially that do not show up Y2Y.

What would a computer or Excel function do for the next quarter for NTE? 
180% 200%? This is why the human touch is so important! The figure I
have estimated is 138% next quarter Y2Y. Still increasing, and still
more than doubling, but reasonably attainable.

I almost hit OVTI sales head on (176% vs 180%), but was way off in the
earnings (OVTI's fault, not mine, sadly)
So adding the human touch, here are the next quarter ROG figures I am
using in my spreadsheet calculations: NTE: 138%, SOHU 195%, UTSI 79%,
NTES 128%, (and SINA 200%)

It is important to note that I do not start with the above figures -- 
I END with them. Here is what I mean:
(1) I first estimate the next quarter $$revenues and $$earnings based 
on the dollar and percent trends (and guidance, if any), then 
(2) I look at the newly derived sequential rates of growth to see 
if they are reasonable based on the sequential trends, then I adjust the
dollar figures if needed, then finally
(3) I look at the new Y2Y figure to see if it makes any sense at all.
Looking at the five above, at a glance they all seem to make sense
except NTES. It looks like I took too much off the top. So,
(4) I refigure, and readjust, and in the case of NTES, end up convinced
that apart from a revenue miracle revival, NTES is going to grow
significantly less than the other two portals.  Most of the rationale
for this conclusion can be seen on post #97 -- analyzing the ROG on the
latest earnings reports of the three.
Heres the link:

That's it for now. Thanks, Clientserver for the interesting topic.

Let's talk some more about this.


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