Companies That Delivered Superior Total Shareholder Returns Are Leading Value Creators

Companies that delivered superior total shareholder return after a period of below-average TSR performance are successful value creators since the 2008 global financial crisis, according to a recent report by The Boston Consulting Group (BCG).

One in 5 companies that delivered below-average TSR during the previous five-year period made it into the BCG top-ten industry rankings for 2009-2013.

By contrast, companies that delivered above-average TSR in the previous five-year period had only a 1 in 12 chance of making the rankings.

The 2014 Value Creators rankings are based on an analysis of total shareholder return (TSR) at 1,620 global companies for the five-year period from 2009 through 2013.

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

The average annual TSR of the 1,620 companies in the sample was approximately 20 percent. The average annual TSR in the 26 industry sectors ranged from a low of 9 percent (in power and gas utilities) to a high of 35 percent (in fashion and luxury).

The overall level of value creation by companies across industries and around the world is by far the highest in any five-year period covered by BCG's Value Creators report in its 16-year history.

The average annual TSR of the top ten 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).

A company had to deliver an average annual TSR of at least 31 percent to be in the top quartile of the global sample and of at least 94.6 percent to make the global top ten.

That is, the most successful companies delivered TSR above 100 percent per year.

And this year’s top value creator—for the second year in a row, the U.S. biopharma company Pharmacyclics—had an average annual TSR greater than 165 percent.

Unlike recent years, when companies from emerging markets dominated the global top ten, this year developed countries won the prize, with seven of the ten coming from the U.S., France, Japan, Ireland, and Sweden.

When it comes to the world’s largest companies, six of the top ten are located in the U.S.—and a seventh, the Chinese Internet-search provider Baidu, is listed on a U.S. stock market.

Many of the winners in this year’s Value Creators rankings are what BCG calls TSR turnarounds.

“TSR turnarounds are companies that deliver superior value creation after an extended period of below-average TSR performance and below-average valuation multiples,” said Frank Plaschke, a partner and managing director in BCG’s Munich office and a coauthor of the report.

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