If the revenue growth for 2020 is 5%, followed by (10%), 14%, and (8%), what questions would you ask about the business?

I would ask what is causing the decline in revenue in 2nd and 4th year. In particular, I would try to figure out if this is a pricing or volume problem, and if it’s cyclical (ie driven by the economy) or non-cyclical. If it’s non-cyclical, I would try to evaluate if the revenue downfalls are one-time or if volatility is a regular feature of the business.

In addition, if a business is regularly experiencing volatility, I would be concerned about its ability to meet interest and mandatory debt repayments if the company has a significant debt load, and it may be worthwhile to examine the company’s debt metrics like Debt / EBITDA or (EBITDA – capex) / (cash interest expense + mandatory debt repayment) in closer detail.