You hear a lot about how Innovation is linked to superior financial performance. The BIQ Innovation Index 2015 (c) tracks exactly that. Here is the index and scores for 2015 with some surprising results.
THE SHARKS HAVE BIG FANGS. BE CAREFUL OF THEIR BITE.
While CNBC’s Jim Cramer from TheStreet coined the FANG moniker, 2 companies the “F” for Facebook and “N” for Netflix in streaming entertainment, together with Apple are our top innovators for 2015. They have strong combination of Enterprise Value creation, year on year sales growth momentum and a high ROIC respective to their industry peers.
Due to a lack of historical public data, the no-show is Google. It’s Chinese competitor Baidu does make it into our top 4 with 36% sales growth YOY. Baidu is in the list of Chinese companies like Alibaba and Xiaomi that implemented innovate business models to attack new markets like mobile commerce that is beyond what western companies have today.
Of the 4th Horseman of Apocalypse we reported in June, “A” for Amazon, is continuing to create unicorns and decacorns such as Prime, Logistics and Web Services but has yet to turn a profit. It does it highest EV/Book value highlighting investors are happy with this strategy and management.
Hennes and Mauritz, the challenger to leader Zara/Inditex in fast fashion, continue their worldwide expansion that is continuing to disrupt head on traditional assumptions about fashion and retailing. As such, gone is the idea of 2 seasons such as SS16 and AW17 per year.
In the more prosaic industries Southwest has benefited from doubling it’s potential market with International Routes and the AirTran acquisition. They also reported record sales and ROIC for the December. Microsoft looks leaner and meaner focusing on core businesses such as 365 Office, Cloud and Xbox franchises although Windows is still a basket case of innovation.
Three companies that should have done better this year with the US rebound this year are Wells Fargo, CVS Pharmacy and Toyota. They ALL seem lacking the next big innovation to drive sales, new markets and value growth.
The 5 year EV darling of Bricks and Mortar Commerce, Macy’s, had a spectacular meltdown dropping from Challenger to Follower in the last 6 months on negative sales growth, markdowns, and competition due to the unseasonably warmer weather this fall.
Ebay, and JP Morgan. Ebay sales in core markets were slightly negative for 2015. While JP Morgan grew EV, their 1.12 Book Value to EV is the lowest of the whole model which shows their difficulty of balancing Regulation vs. Innovation across many geographies.
The rest of the companies were included as previous innovators or as part of a peer group. These include American Airlines, General Motors, Oracle, Best Buy and Walmart. Their financial performance, innovation capacity and outlook are neutral to negative.
Two of the S&P Top 10 by Market Capitalization, Google and AliBaba, together with Lending Club and were excluded from the Index for not having enough historical public data for the analysis. From the rest of the S&P Top 10, we do not cover Berkshire, Exxon, GE, Petro China or ICBC.
Click here to see the full analysis.