Profitablility

If you invest in an enterprise, what you hope is that the enterprise makes money. You also want your investment to provide returns commensurate with the risk involved. Anyone can but bank Cd's or Treasury Bonds to get a relatively safe return (main risk there being inflation). However, if you invest in equities or another enterprise that carries the risk of failure, you expect a better return if it is successful.

You also would like the potential to see your investment's value grow. In fact, there are many stocks that only provide price appreciation as the possible return since they don't pay dividends. Of course if they are making money and reinvesting the money, you should see the value of your investment grow.

So fundamentally, the most important thing is that the enterprise returns a profit. A secondary consideration would be that the profit increases over time. Now, all of this is relative to where you make your investment. It is fairly rare for investors to be in at the inception of an enterprise. More likely you are considering the future of an ongoing enterprise and trying to decide if its stock is a good investment. Now, if the enterprise used to be much bigger but has contracted and revised its business model, the current enterprise is what you need to consider, not the enterprise that used to exist.

In our current economic situation, many businesses have contracted and reduced costs in order to adjust to the reduction in consumer demand. The fact that consumer demand is less than it was is really irrelevant since to make money you have to be a realist. If you can adjust your business model to be profitable at current demand levels you are a successful business. Over time, the demand may grow back to where it used to be and if it does, the enterprises can grow along with it, but there is no need for that return to happen quickly.