…under many commonly encountered strategic situations, growth in sales and even growth in earnings add nothing to a firm’s intrinsic value. This statement seems to contradict an article of faith about a company’s sales and profits—[that] growth is good. However, as we explained earlier, growth on an even economic playing field creates no value. It will be useful to review why. Growth in sales that finds its way to the bottom line (net income) would seem to imply that there is more money available to investors. But growth generally has to be supported by additional assets: more receivables, more inventory, more plant and equipment. These extra assets that are not offset by higher spontaneous liabilities have to be funded by extra investment, whether from retained earnings, new borrowings, or sales of additional shares. That cuts into the amountof cash that can be distributed and thereby reduces the value of the firm. For firms that are not protected by barriers to entry and thus do not enjoy sustainable competitive advantages over their rivals, the new investment produces returns that are just enough to offset the costs of the new investment. The net gain is zero.

— Greenwald et al, Value Investing, p.42

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