Tommy Douziech

Analyst
Tommy Douziech is above all a GARP investor who enjoys exploiting market inefficiencies on qualitative stocks with a nice margin of safety. Specialist in marketing and passionate about finance, this market analyst has made a place for himself at Marketscreener, juggling between long-term value investments, trading strategies and market psychology as he sees fit.

Companies with sustainable growth

03/22/2022 | 10:33am EDT

Each year, Fortune magazine, in partnership with the Boston Consulting Group, compiles a global ranking of the 50 companies with the best prospects for sustainable growth. This "Fortune Future 50" showcases companies that demonstrate impressive execution capabilities and strategic agility in a fast-changing world. They also have a long-term vision for organic growth.

Every successful business begins with an act of imagination. But the most innovative companies are those that continually reimagine their potential, even if it means radical changes in strategy. This constant focus on the future usually pays off handsomely for investors. Four years ago, Fortune partnered with management consulting firm BCG to create the Future 50, using a proprietary system that analyzes dozens of factors to identify the companies with the best long-term growth potential.

Methodology

To identify the Future 50, BCG Henderson Institute examined more than 1,000 publicly traded companies with a market capitalization or revenue of at least $20 billion in the 12 months leading up to the end of 2020.

The Fortune Future 50 Index is based on two pillars:

A "top-down" assessment based on identified market potential: 30% of a company's score is based on this market potential, defined as its expected future growth as determined by the financial markets. It is assessed by calculating the proportion of its market value that is not attributable to the earnings stream of its existing business model. A "bottom-up" assessment of a company's ability to generate growth: this represents the remaining 70% of the score. This score includes 19 factors, selected for their ability to predict growth over the next five years, which fall into four categories: Strategy, Capital Expenditure and R&D Capacity, Management and Company Structure.

Performance

The average performance of the companies in this ranking generally outperforms the MSCI World Index (comprised of the world's 1,539 largest capitalizations) from the time of its publication. However, 2021 was a tougher year for the 2020 ranking with a slight underperformance compared to the benchmark

.

There are several reasons for this underperformance:

First, highly valued growth stocks underperformed the market in 2021. Second, Chinese companies have fallen sharply as a result of sanctions and the Beijing government's unaccommodating policy toward the equity market.

2021 Ranking

Here are the top 10 in this ranking:

The technology sector continues to dominate the Future 50. Companies in the information technology, communication services and e-commerce sectors account for 64% of the index. Enterprise technology companies are still strongly represented with companies like Workday, ServiceNow, Veeva, and Coupa.

As might be expected with the increase in remote work due to Covid, digital collaboration companies like Zoom and Atlassian make up 10% of the index. The growing reliance of companies on digital and artificial intelligence solutions explains the strong demand for cloud-based security and monitoring services, which are also well represented in the index with companies like CrowdStrike, Okta, Zscaler.

The full ranking of the 50 companies is available here.

The study of market history reveals that crises, pandemics and wars reshuffle the deck and lead to new growth opportunities for companies nimble enough to adapt to the new norm. Adaptation and reinvention will remain at the heart of creating a sustainable competitive advantage (also called "moat"). Francis Scott Fitzgerald said, "Vitality is not only the ability to persevere, but more importantly, the ability to reinvent." In other words, uncertainties create gaps. Behind every crisis lies an opportunity for those who know how to seize it.


© MarketScreener.com 2022
Stocks mentioned in the article
ChangeLast1st jan.
ATLASSIAN CORPORATION PLC -1.98% 283.55 Delayed Quote.-24.11%
COUPANG, INC. -2.30% 17.81 Delayed Quote.-37.78%
CROWDSTRIKE HOLDINGS, INC. -1.93% 196.57 Delayed Quote.-2.12%
MSCI WORLD 0.07% 2844.42 Real-time Quote.-12.04%
OKTA, INC. -4.49% 101.28 Delayed Quote.-52.71%
PERFORMANCE FOOD GROUP COMPANY -1.50% 52.57 Delayed Quote.16.19%
SERVICENOW INC. -1.64% 488.51 Delayed Quote.-23.47%
TWILIO INC. -6.22% 81.4 Delayed Quote.-67.05%
VEEVA SYSTEMS INC. -1.53% 226.12 Delayed Quote.-10.15%
WORKDAY INC. -1.50% 175.17 Delayed Quote.-34.92%
ZOOM VIDEO COMMUNICATIONS, INC. -6.01% 102.61 Delayed Quote.-40.63%
ZSCALER, INC. -2.73% 173.9 Delayed Quote.-44.42%