Eric E. Olsen, Frank Plaschke, Daniel Stelter have written an excellent paper which is posted on the Boston Consulting Group web site entitled "Spotlight on Growth: The Role of Growth in Achieving Superior Value Creation".
The paper starts with several questions:
- "How much revenue growth does a company need in order to achieve its aspirations for shareholder value?
- What is the right tradeoff between that growth and other priorities - for example, improving returns on capital or increasing payout to investors?
- Does the source of growth matter? Should a company focus on organic growth, acquisitive growth, or both?
- How does growth affect a company's valuation multiple?
- What is the right tradeoff between sort-term and long=term growth?
- How should a company's growth strategy be positioned with its current investors?"
As one would expect from a BCG study, these questions are explored in depth. The articles appendix includes an analysis of companies that have created value via growth. The answers are surprising. It is worth a look.
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