What separates winners: The proven playbook for exceeding shareholder expectations.

How do only a few companies in the S&P 500 consistently outperform their peers in delivering shareholder expectations while the majority lag behind? Value creation above shareholder expectations in the S&P 500, for example, occurs almost entirely in the top quartile of performers. The secret lies not in one-time wins but in mastering a repeatable formula for sustainable growth – one that transforms Economic Profit and Invested Capital into a self-perpetuating engine of shareholder value.

‍

At PivotXY, we believe the key lies in a company’s ability to grow Economic Profit (earnings above the cost of capital) and Invested Capital in tandem, creating a self-reinforcing cycle of accelerating performance and shareholder value at a pace that competitors cannot match. This is the first post in a six-part series to spell out this approach so you can apply it to your own analyses. (Find the other posts here: Post 2, Post 3, Post 4, Post 5 and Post 6)

This approach resonates across corporate leaders, boards, M&A teams, active investors and others from multiple perspectives:

• Intuitively: Consistent profit growth is expected to lead to increased value. Faster growth leads to more value. PivotXY quantifies these dynamics to provide leaders with clarity and precision.
  

• Strategically: A proven cornerstone of sustainable competitive differentiation is out-investing competitors. Disciplined and consistent alignment of capital deployment towards profit-growth opportunities is the path to higher investment capacity.
  

• Statistically: Analyses across industries and time periods show Economic Profit growth correlates more strongly with long-term shareholder value creation than traditional metrics, making it a more reliable guide for setting strategy and assessing performance.

Company segmentation with PivotXY's Competitive Benchmarking module

‍

Our Competitive Benchmarking module features an approach to segmentation that classifies companies into four distinct categories based on their ability to actively manage the levers that create superior shareholder value and sustainable competitive differentiation:

‍

Champions grow Invested Capital year after year, driven by sustained Economic Profit growth. Champions excel at directing increasing levels of investment at initiatives that drive profit growth, consistently outperforming competitors in shareholder value creation.

‍

Idlers prioritize dependable, stable dividends above all else, limiting risk-taking and capping growth. These typically underperform in terms of share price appreciation.

‍

Chasers aggressively pursue growth – often through M&A – but fail to translate it into sustained profit growth. Over time, their investment capacity erodes, resulting in underperformance in share price trajectory.

‍

Agile Transformers embark on disciplined transformations, often driven by new strategies and leadership. These organizations aim to align strategy, portfolio focus, and capital allocation to ignite the self-reinforcing cycle of performance.

‍

In this series, we’ll explore what separates the best from the rest and how PivotXY’s tools can help you rise to the top. Over the following posts, I’ll share what it means to be a Champion, Agile Transformer, Chaser, or Idler, and the opportunities and challenges of each type of company.

‍

See how your company ranks – and why – with a free Competitive Benchmarking report

‍

PivotXY enables real-time benchmarking of any company against the best in their industry, or against peers competing in parallel market conditions. We'll identify performance gaps and highlight the capital allocation decisions that drive strategic and shareholder value success.

‍

Contact us if you’d like to see our live tool in action or request a free performance report for your company.

‍