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  • The more detailed analyses of TSR performance in the appendix exhibits show that, with a few exceptions, 2008 saw a major narrowing of the gap between the EBITDA multiples of the top ten in a sample and the average multiple of the sample as a whole. This nar- rowing is most apparent in the global sample, as can be seen in the exhibit “Value Creation at the Global Top Ten Versus Total Global Sample, 2004–2008,” on page 30. This narrowing suggests that the late 2008 selloff hit companies with high valuations (based on strong economic fundamentals before the market sell- off) comparatively harder than those with weaker val- uations (based on poor fundamentals). If there comes a time when substantial portions of the money that moved into cash in late 2008 start returning to the eq- uities market, these companies could benefit dispro- portionately.

  • Another striking change between 2007 and 2008 is the decline in dividend yields, both on average and for the

top ten, in the global sample and in nearly every in- dustry. Given the sharp decline in stock prices in 2008, one would expect dividend yields (which are the ratio of dividend payout to stock price) to increase. The de- cline would seem to indicate that many companies were indeed cutting dividends to preserve financial flexibility—even financially strong companies.

Exhibit 2. For the Top Ten Performers, Sales Growth Is a Major Lever of Value Creation

TSR1 (%)

Sales

Margin

Multiple

Dividend

growth (%)

change (%)

change (%)

yield (%)

+

Valuation multiple

+

Value

Fundamental

creation

=

value

Cash flow contribution

Share

Net debt

change (%)

change (%)

Machinery and construction Technology and telecommunications Chemicals Multibusiness Mining and materials Consumer goods Pharmaceuticals and medical technology Utilities Retail Transportation and logistics Travel and tourism Automotive and supply Media and publishing Pulp and paper Global top ten

34.7

32.4 27.7

21.9 21.8

21.1 21.0

20.0 19.5

17.5 15.1 12.0

10.1 7.4

48.4

19 24

–1

15 15

32 16 14 12 13

–5

14 15

–1

8

8 2 2 0 2

4 4

7 3

6

18

3 3

  • 2

10

8 4

  • 1

  • 7

  • 15 5

3 2

  • 2

  • 5

  • 3

  • 6 0 2 5

2 1 2 3 4 4 1 4 3 2 5 3 2 3 2

  • 3 1

  • 1

  • 2 0

  • 2

  • 1 0 1 1

  • 3

  • 1

  • 1

  • 1

  • 2

1 4 4

12

  • 1

  • 1 2 7 1 2 1 5 3 0 15

Sources: Thomson Reuters Datastream; Thomson Reuters Worldscope; Bloomberg; annual reports, BCG analysis. Note: Decomposition is shown in percentage points of five-year average annual TSR; apparent discrepancies with TSR totals are due to rounding. 1Five-year average annual TSR (2004–2008) for weighted average of respective sample.

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