I was listening to a famous investor discuss an investment of his in an interview. He had bought shares in a bank that was quite successful, though it was a small bank. The bank is based in a highly under-developed country with a massive population. This country's economy has a high rate of growth (about 8%).
The investor made an interesting comment. He said,
"of course, the bank is going to grow at 3x the growth rate of the country's GDP."
He didn't offer any further reasoning for this. And it wasn't clear whether he meant the bank's revenues or its stock price are going to grow at 3x.
However, this led to me thinking about an interesting issue that I had never considered before.
There must be some kind of model which helps us predict whether a company's (1) revenue and (2) stock price will grow faster or slower than the overall economy.
What are some of the variables and considerations in this model, and in what direction do they act (e.g. do they grow or reduce (1) or (2))?