In “Godfather II,” Hyman Roth said, “We’ll be bigger than U.S. Steel.” I always chuckle at that line, having the benefit of hindsight.

I recently referred to a well-worn quote by Warren Buffett that his favorite holding period for a stock is forever. But the reality is that companies, like anything else, have a life cycle. Knowing where a company is in that cycle can help your investing.

Life-cycle stages are subject to refinement, but the Corporate Finance Institute lists them as launch, growth, shakeout, maturity, and decline. In the launch phase, you’ll typically see low profitability or losses as the company is spending more than it makes to invest in the business’ operations and marketing. For a Main Street investor, this is a speculative company, and no hype surrounding its IPO can change that.

In the growth stage, revenues increase at a high rate and the company has the opportunity to achieve consistent and growing profitability. This stage is the sweet spot for investors. The question is whether you can find these stocks selling at reasonable prices. That’s where having a watch list of well-run, high-growth companies can help. From time to time, despite their favorable investment qualities, many of these companies will go on sale periodically.

The shakeout stage is when these companies see sales growth begin to decrease. That might be because of increased competition, as other companies take notice of their growth and offer rival goods and services. Or their growth stage was simply fated to slow down by the limits of their market. For example, Intel’s market share is above 70% – there simply isn’t much market share left to conquer.

Brick-and-mortar retailers are another classic example. Costco has a finite number of stores it can build. The locations need to accommodate a huge footprint while being near a population center. There’s plenty of space to build Costcos in North Dakota, but not enough population to support more than two. When a company is nearing the saturation point for its original concept, you’ll often see it trying out new concepts to maintain growth. This is a tricky time for investors. It’s important to follow the company’s progress to understand whether it can continue expanding at a reasonable cost.

During the maturity phase, sales and profitability level off or decrease. This is where great management can make a huge difference. Some companies can reinvent themselves. IBM, for example, transformed from a computer hardware company to a services company. Netflix went from a DVD-rental company to a streaming service (though much to my surprise, it still offers DVD rentals).

The final stage – decline – sees the company’s fundamentals all decreasing. Kodak, Blockbuster, Sears all failed to innovate and adapt to changing times. Kodak is a shell of what it used to be, Blockbuster is gone, and Sears emerged from bankruptcy last year with 22 stores remaining.

This is a common story in business. Savvy investors understand where companies are in their maturity and look for evidence that they’ll adapt and thrive when these firms reach the latter stages of their life cycle.

Evan R. Guido is the founder of Aksala Wealth Advisors LLC, a 2018 Forbes Next-Gen Advisors List Member, and Financial Professional at Avantax Investment ServicesSM. Evan heads a team of retirement transition strategists for clients who consider themselves the “Millionaire Next Door.” He can be reached at 941-500-5122 or eguido@aksalawealth.com. Read more of his insights at heraldtribune.com/business. Securities offered through Avantax Investment ServicesSM, member FINRA, SIPC. Investment advisory services offered through Avantax Advisory ServicesSM, insurance services offered through an Avantax-affiliated insurance agency. 6260 Lake Osprey Drive, Lakewood Ranch, FL 34240.

This article originally appeared on Sarasota Herald-Tribune: EVAN GUIDO: Do you know where your investments are in their life cycle?