| BUSINESSWEEK ONLINE : MARCH 29, 1999 ISSUE | ||||||||
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| COVER STORY
Spotting Winners: Our Selection Criteria Sure, size matters. But what's the point in being bigger if you're not better? With that in mind, BUSINESS WEEK two years ago introduced our Performance Rankings and its centerpiece, the BW 50 list of the best overall performers among the S&P 500 companies. We wanted to go beyond static lists that rank companies by sheer size or market capitalization. So we created a measure of growth that rewards companies for performance that truly rises above the crowd. To calculate our Performance Rankings, we began with two important factors investors use to judge performance: top-line revenue growth and earnings growth. We added total returns, a measure of how well management is doing. And recognizing that it is much harder to sustain growth than sprint for a few quarters, we tallied all three of those crucial rates over both one- and three-year time spans. Finally, we added two important indicators of the returns management earns from its assets: net margins and return on equity, both for one year. With those criteria in hand, we evaluated each of the companies in the closely watched Standard & Poor's 500-stock index. (S&P is owned by The McGraw-Hill Companies, which also owns BUSINESS WEEK.) Why the S&P 500? Because it is a universally accepted measure for stock performance, both on Wall Street and among small investors. Its 500 companies together comprise 70% of the market value of U.S. stocks. What you're left with is an in-depth look at how these companies really stack up against one another. Who had the best--or worst--three-year shareholder return among the 500? The best net margins? Answers to those questions and more can be found in the tables throughout this package. MAKING THE GRADE. But that's only a start. We've also graded the 500 companies on each of the eight criteria, based on how well each performed against other companies in the index. For each measure, the top 20% of companies earned A's the next 20% got B's, and so on down to the F's in the bottom 20%. The several S&P companies for which data were not available got incompletes. Finally, to get our overall Performance Rankings of the 500--and select the elite that make up each year's BW 50--we averaged together the individual rankings each company received for the different criteria. Then, to recognize that it's much easier for small companies to score big percentage gains than it is for big companies, we weighted them by sales volume. That gives you the overall Performance Rankings. The same criteria form the basis for each company's ranking within its sector, which can be found in our Industry Rankings tables. Together, the pair of tables form an annual corporate scorecard. Think of those at the top as the All Stars. For the bottom dwellers, it's time to run some laps. By Dan Beucke in New York _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP |
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