Investors often seek the secret sauce to sustained stock market success, and the data from a BCG Analysis and Morgan Stanley Research study of S&P 500 top-quartile performers (1990–2009) sheds light on this mystery. The chart highlights how sales growth, or topline growth, emerges as the dominant driver of long-term stock performance.
Over a 10-year period, revenue growth accounted for 74% of total shareholder return, dwarfing contributions from profit (15%), margin (6%), multiple (5%), and free cash flow (6%). This trend becomes even more pronounced over longer horizons: at 5 years, revenue growth contributed 58%, while at 3 years, it was 50%. Even in the short term (1 year), it played a significant role at 29%.
The takeaway? Consistent sales growth is the backbone of enduring stock performance. While profit, margins, and cash flow matter, they take a backseat to the engine of revenue expansion. For investors, this underscores the importance of backing companies with strong, scalable growth strategies. As the data spans from 1990 to 2009, it reflects a robust historical pattern that remains a critical benchmark for evaluating potential winners in today’s market.
Source: BCG Analysis, Morgan Stanley Research
The takeaway? Consistent sales growth is the backbone of enduring stock performance. While profit, margins, and cash flow matter, they take a backseat to the engine of revenue expansion. For investors, this underscores the importance of backing companies with strong, scalable growth strategies. As the data spans from 1990 to 2009, it reflects a robust historical pattern that remains a critical benchmark for evaluating potential winners in today’s market.
Source: BCG Analysis, Morgan Stanley Research
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