(2024-04-21) Denning How The 5-year Total Return Helps Measure Value Creation Performance

Steve Denning: How The 5-Year Total Return Helps Measure Value Creation Performance. The 5YTR shows how the stock market’s perception of the value of the stock has changed over the years.

The stock market thus functions as a “societal determinator” of public companies. Although investors may be pursuing their own self-interest and short-term gains, and stock prices can fluctuate wildly in the short-term, the collective actions of multiple “bullish” and “bearish” investors over time can result in relatively stable public valuations over time.

The 5YTR’s Strengths

1. The Stock Market Draws On A Cornucopia Of Supporting Evidence:

The 5YTR’s Limitations

1. The 5YTR Is Necessary, But Not A Sufficient, Condition Of Success.

2. The 5YTR Prioritizes The Viewpoint Of Shareholders: