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The Importance of Value-Creating Growth

Value-creating growth builds the advantages of scale and scope, attracts talent, delivers funds for reinvestment, and forces competitor investment.

Put simply, growth is the most important controllable driver of total shareholder return (TSR).

A study of the top-quartile value creators in the S&P Global 1200 from 1993 through 2013 demonstrates the value of growth, even in the short term. Revenue growth accounted for 32% of one-year TSR—more than twice the contribution of increased free cash flow and more than double that of margin expansion. And in the long term, revenue growth was nearly all that mattered, accounting for 71% of ten-year TSR.

Of course, growth isn't easy. . But growth is possible regardless of industry sector. On average, variability in growth rates is five times greater within an industry than it is across industries. It's not the cards companies are dealt—it’s how they’re played.

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