US tech investors increasingly value earnings over sales growth.

The focus on corporate profitability instead of ‘growth at-all costs’ has gained wide acceptance in the innovation economy. In this paper we present evidence of stock price outperformance for small-capitalization technology companies growing earnings faster than revenues.

Key takeaways

  • Active management of currencies is an important lever to pull for companies with a renewed focus on earnings.

  • Balance-sheet hedging programs aim at protecting current period earnings, while cash flow programs insulate future earnings.

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