Why Bad Multiples Happen to Good Companies

A premium multiple is hard to come by and harder to keep. Executives should worry more about improving performance.

Susan Nolen Foushee, Tim Koller, and Anand Mehta

Executives focused on having the highest multiple are missing the point. Rather, as companies with high total returns to shareholders (TRS) know, executives should focus on the amount of value they create—with regard to growth, margins, and capital productivity. Doing so won’t necessarily lead to a higher earnings multiple.