IN THE PAST FEW YEARS the term company has been frequently used by Security Analysts and investors. Some of the characteristics ascribed to growth companies include: (1) rapid sales increase over an extended period of time; (2) new product development of an alert research department; (3) large capital expenditures; (4) high depreciation charges; (5) low dividend payments compared with earnings; (6) frequent stock dividends; and (7), above all, aggressive and able management. In short, if a company has several of the above attributes, it is usually accepted as a growth company. Consequently, its stock reflects the expectation of a continued growth of earnings by selling at a high priceearnings ratio. Further, as is often the case, Analysts become so bemused by a growth company that they often fail to study the basic factor: the growth rate of net income. It is believed that the growth rate of net income of a company should be calculated for a 10-year period. This can be compared profitably with similar companies in the same industry. In addition, it is possible by using the growth rate to project the past 10 years' earnings trend forward another 10 years and estimate the earnings of a company at that time. This would of course assume that the same rate of growth is maintained. While the projection of past records into the future earnings might seem to be an invalid method of estimating growth, it does serve as a tool for comparison of various securities. We will endeavor to show that it is useful to compare the estimated earnings of several companies in 1968 based on a formula, together with their prices at the end of 1959. An example might be taken of the growth rate of earning for International Business Machines Corporation for the years 1939-1948, as shown in Table L. Using Table l's correlation techniques, a measure can be found that shows the annual rate of earnings growth. Applying Glover's tables for the value of M or 5.67, see Table II, it will be seen that r equals 1.160. This means that the annual rate of increase of earnings of International Business Machines Corporation from 1939 to 1948 was about 16%. Since it is assumed that the Table II calculation was made in 1949, a time when the earnings for 10 years from 1939 through 1948 were available, it might be interesting to forecast the earnings for 1958. This can be done by selecting the equation to the simple exponential curve, as follows: y arx.