The 2009 Value Creators Rankings
The 2009 Value Creators rankings are based on an analy- sis of total shareholder return at 694 global companies for the five-year period from 2004 through 2008.
the global sample’s average annual sales growth of 8 per- cent was almost entirely eroded by declines in EBITDA multiples, which accounted for a negative seven percent- age points of TSR, on average.
To arrive at this sample, we began with TSR data for more than 6,000 companies provided by Thomson Reu- ters. We eliminated all companies that were not listed on some world stock exchange for the full five years of our study or did not have at least 25 percent of their shares available on public capital markets. We also eliminated certain industries from our sample—for example, finan- cial services.1 We further refined the sample by organiz- ing the remaining companies into 14 industry groups and establishing an appropriate market-valuation hurdle to eliminate the smallest companies in each industry. (The size of the market-valuation hurdle for each individual industry can be found in the tables in the “Industry Rank- ings,” beginning on page 32.) In addition to our 694-com- pany sample, we also separated out those companies with market valuations of more than $30 billion. We have included rankings for these large-cap companies in the “Global Rankings,” on page 31.
As always, however, the leading companies in our sample substantially outpaced not only their own industry aver- age but also the total sample average. For example, the average annual TSR of the global top ten was more than 16 times greater than that of the sample as a whole—48.4 percent on average. (See Exhibit 2.) The top ten compa- nies in each industry outpaced their industry averages by between 9.1 percentage points (in utilities) and 31.1 per- centage points (in technology and telecommunications). And in every industry we studied, the top ten companies, on average, also did substantially better than the global sample average—by at least 4.5 percentage points of TSR. The lesson for executives is this: Coming from a sec- tor with below-average market performance is no excuse. No matter how bad an industry’s average performance is relative to other sectors and to the market as a whole, it is still possible for companies in that industry to deliver superior shareholder returns.
The global and industry rankings are based on five-year TSR performance from 2004 through 2008.2 We also show TSR performance for 2009, through June 30. In addition, we break down TSR performance into the six investor- oriented financial metrics used in the BCG decomposi- tion model.3
1. We chose to exclude financial services because measuring value creation in the sector poses unique analytical problems that make it difficult to compare the performance of financial services compa- nies with companies in other sectors. For BCG’s view of value cre- ation in financial services, see Living with New Realities, The 2009 Creating Value in Banking Report, February 2009.
The average annual return for the 694 companies in our sample was 2.9 percent—and in 5 of the 14 industry sam- ples, TSR was actually negative, on average, during the past five years. (See Exhibit 1.) This poor performance re- flects the precipitous decline in market values in late 2008 owing to the global financial crisis. The TSR delivered by
2. TSR is a dynamic ratio that includes price gains and dividend pay- ments for a specific stock during a given period. To measure perfor- mance from 2004 through 2008, 2003 end-of-year data must be used as a starting point in order to capture the change from 2003 to 2004, which drives 2004 TSR. For this reason, all exhibits in the report showing 2004–2008 performance begin with a 2003 data point.
3. This model has been described in previous Value Creators reports. See, for example, Missing Link: Focusing Corporate Strategy on Value Creation, The 2008 Value Creators Report, September 2008, p. 20.