↗️ Share price linearity

Over the last 15 years, Descartes Systems Group has grown its share price at an annualised rate of 24% per year. Just as impressive is the fact that it did so with a linearity of 0.93. Linearity refers to how straight a line. Companies with high linearity have a RSq value between 0.9 and 1.0. This means their share price has grown very predictably, with little volatility.

While a share price jump in the short-term can be the result in a change in market sentiment, it takes a lot more than that to achieve long-term share price appreciation. Based on my own personal findings, companies that achieve linear share price increases over the long-term have benefited from:

• Predictable growth in fundamentals
• Ownership by quality investors (i.e. patient long-term investors, rather than day traders and short sellers).

I've just uploaded my latest database of share price linearity. You can find it on the Exclusive Content page under the heading: Global share price linearity database. It's sorted by geography, meaking it easier to discover underlooked non-US companies too.

One such company that stands out is Belgium's Lotus Bakeries (the makers of Biscoff biscuits). Over the last 15 years, the company has managed a 26% CAGR with a linearity of 0.90.

Here’s a snapshot from the database, which includes both a rank and a score. The rank considers performance (CAGR and R²) over the last 5, 10, and 15 years, while the score assigns 1 point for each period where a company compounds at >15% with a linearity over 0.90. Companies scoring 3 points demonstrate consistent performance across all three timeframes.

Understanding which companies exhibit both strong growth and linearity can help investors identify durable wealth creators. Hopefully this tool will provide you with invaluable insights into consistent, predictable growth companies.

Whether such impressive growth will continue into the future, is for the individual investor to decide for themselves.