Why revenue growth doesn’t always increase value

We recently worked on a valuation where increasing revenue growth actually led to lower net income.

This is because growth often comes with additional fixed costs — new staff, larger facilities, expanded operations. If the incremental revenue isn’t enough to cover those costs, profits can actually decline in the short term.

So during expansion, you might see years where the business looks worse on paper.

Not because the strategy is wrong —
but because the company hasn’t reached scale yet.

Once revenue passes a certain threshold and fully absorbs those fixed costs, profitability improves significantly.

Bottom line:
Growth creates value only when it’s profitable growth, not just revenue expansion.

#ORNA #BusinessValuation #DCF