One investment maxim that I truly believe is the following - stock prices ultimately follow earnings. Show me a company with consistently rising profits, and I'll show you a stock that is probably rising over time.

However, when evaluating a company and its profitability, check to see how those profits are being generated.

For example, a company that is generating higher profits primarily through cutting costs is a company where earnings growth is going to be limited by the amount of fat that can be cut. Since you cannot cut costs forever, a company that banks on reducing costs to generate higher profits will eventually be unable to cut its way to long-term profit growth.

On the other hand, a company that is driving higher earnings by achieving higher sales is a firm with a much more enduring growth story. Those are the types of companies that are highly prized among investors.

There are many things that can be considered when choosing stocks. However, if you focus your energies on buying companies with the following characteristics - solid and consistent earnings and revenue growth - you'll be much better off over the long run.