Most companies are constantly striving for growth. But from a shareholder’s perspective, if the ultimate goal is value creation and return on investment, then not all measures of growth adequately tell the whole story. Earnings per share can be gamed and top line sales growth does not necessarily translate into value creation. Economic value only arises if the profit generated from capital employed is greater than cost of capital, and as such, should be a prudent capital provider’s main concern.
In a new white paper from ISS, the EVA research team takes a deeper look into what are the real drivers of growth with a particular focus on the growth of Economic Value. Some key findings from the paper include:
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