That being said, turnover is valuable only if, at some point, it can be translated into earnings. Consider construction companies, which have high sales turnover, but (with the exception of building booms) make modest profits. By contrast, a software company can easily generate $4 in net profit for every $10 in sales revenue. What this discrepancy means is that sales dollars cannot always be treated the same way for every company.
Some investors view sales revenue as a more reliable indicator of a company’s growth. Although earnings are not always a reliable indicator of financial health, sales revenue figures can be unreliable too.
Comparing companies’ sales on an apples-to-apples basis hardly ever works. Examination of sales must be coupled with a careful look at profit margins and then comparing the findings with other companies in the same industry.