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Growth is the driver of stock appreciation. The basic way investors determine what to pay for a stock is to look at the value of its assets, minus its liabilities, and then factor in expected future earnings.

With growth, those expected earnings get bigger, and the company’s stock prices go up. The reverse is also true.

Once growth is factored into the stock prices, falling short of those targets will make the stock drop, even if the company is profitable.

Growth can refer to sales, but for most investors, what really matters is profit growth. Lean helps grow profits in two ways.

  • It cuts costs, increasing the bottom line. This has a limit, though. Cost cutting only goes so far.
  • It makes sales easier. Having short lead times and high quality are good selling points.

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