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Apple, Starbucks gave good returns to shareholders: Report

By Devina Joshi
August 11, 2014 14:29 IST
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Total shareholder return (TSR) has emerged as an important metric to measure value creation for companies post the 2008 economic meltdown.

Some of the most successful value creators since the 2008 global financial crisis are firms that understand how to achieve a comprehensive TSR turnaround.

After all, successful value creators cannot afford to be complacent - the higher their past TSR and the higher their valuation multiple, the more disciplined about value creation they will have to be to maintain their superior performance. This is among the revelations of a recent report by The Boston Consulting Group (BCG).

The 2014 Value Creators rankings are based on an analysis of TSR at 1,620 global companies for the five-year period between 2009 and 2013.

The ranking lists the top 10 value creators for the entire sample, for all large-cap companies (those with a market valuation of more than $50 billion), and for companies in 26 separate industrial sectors.

Unlike previous years when companies from emerging markets dominated the global top 10, this year developed countries took the cake with seven of the 10 hailing from the US, France, Japan, Ireland and Sweden.

The top value creator is the US biopharma company Pharmacyclics with an average annual TSR greater than 165 per cent.

The average annual TSR of the companies in the sample is 20 per cent, while the average annual TSR in the 26 industry sectors ranged from a mere 9 per cent (in power and gas utilities) to a high of 35 per cent (in fashion and luxury).

The average annual TSR of the top 10 companies in each industry outpaced their industry averages by between 12 percentage points (in power and gas utilities) and 51 percentage points (in travel and tourism).

When it comes to the world's largest companies, six of the top 10 are located in the US and a seventh, the Chinese internet-search provider Baidu, is listed on a US stock market. Leading US large-cap value creators include and Las Vegas Sands, at number one and number two, respectively; Starbucks and are at numbers six and seven while auto major Ford Motor stands at number eight and Apple at number nine.

The results of this year's report are influenced by the fact that the starting point of the five-year holding period took place at time of the global financial crisis.

In fact, many of the toppers in the report are 'TSR turnarounds' - companies that deliver superior value creation after an extended period of below-average TSR performance and below-average valuation multiples.

Among the TSR turnarounds profiled in the report are the Mexican conglomerate Alfa, number one in the multi-business top 10 ranking; disk drive maker Seagate Technology, number two in the technology top 10; and US-based media company Gannett, which since March 2012 has tripled its share price and has been one of the top value creators in the S&P 500.

Now let's look at India's performance in the industry-wise rankings. ITC figures at number eight in the top 10 consumer non-durables rankings, whereas JSW Steel is ranked number three in the metals rankings. HCL and TCS feature at four and six, respectively in the technology top 10. In the automotive components top 10, MRF is ranked at number six.

Tata Motors, Bajaj and Mahindra & Mahindra are awarded the fifth, sixth and 10th spot respectively, in the automotive OEM top 10 list. Lupin just about manages to make it in the biopharma top 10 while Shree Cements, Asian Paints and UltraTech Cement all feature in the top 10 building materials list.

In the future, TSR turnarounds will not just be leading value creators.

Focusing on TSR and its drivers can also be a recipe for successful companies to maintain strong value-creation momentum or for mediocre ones to become top performers, concludes the report.

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Devina Joshi
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