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Methodology for The Future 50

METHODOLOGY

To identify the Future 50, BCG examined 1,100 publicly traded companies with at least $20 billion in market value or $10 billion in revenue in the 12 months through the end of 2017. A company’s final score represents its outperformance across the following metrics when compared with peers of a similar size.

50% of a company’s score is based on market potential—defined as its expected future growth as determined by financial markets. This is assessed by calculating the present value of its growth opportunities, which represents the proportion of its market value that is not attributable to the earnings stream from its existing business model.

The other 50% is based on a company’s capacity to deliver against this potential. This score comprises 17 factors, selected for their ability to predict growth over the following five years. These factors fall into four categories:

Strategy: Our A.I. algorithm relies on natural language processing to detect a company’s strategic orientation from its SEC filings and annual reports. We assess the clarity of a company’s strategy from earnings calls. We also assess a company’s commitment to sustainability from its governance rating by Arabesque, a data-analytics firm.

Technology and Investments: A company’s capital expenditures and R&D (as a percentage of sales) measure its investment in the future. Technology advantage is assessed through the growth in a company’s patent portfolio and that portfolio’s digital intensity (share in computing and electronic communication). To account for external innovation, a company’s portfolio of startup investments is compared with the best-performing global venture capital funds.

People: We assess the age and tenure of a company’s executives and directors, as well as the share of managers and employees who are female. The value of consistent, focused management is assessed via leadership stability and smaller board size.

Structure: A company’s age and (revenue-based) size are correlated with vitality loss. But three-year and six-month sales growth can be predictive of future growth as signs of revitalization.

 

Company profiles written by HEAD WRITERS: Eamon Barrett, Matt Heimer; CONTRIBUTORS: Scott DeCarlo, Ryan Derousseau, Grace Donnelly, Erika Fry, Robert Hackett, Adam Lashinsky, Sy Mukherjee, and Jonathan Vanian.