Facebook Inc (FB) Ranks Amongst The Top 10 Most Innovative Growth Companies Whereas Google (GOOGL) Is Placed At No. 115 And Apple (AAPL) At No. 282
When it comes to driving growth through innovation, Facebook Inc (NASDAQ:FB) seems to be leading both Google Inc (NASDAQ:GOOG)(NASDAQ:GOOGL) and Apple Inc. (NASDAQ:AAPL). According to the list of the Forbes’ World’s Most Innovative Growth Companies, Facebook emerged in the top 10 in this year’s rankings.
The List considers companies that have at least $10 billion in market value and seven years of public finance record. On that basis, this year’s ranking saw Google Inc (NASDAQ:GOOG)(NASDAQ:GOOGL) coming in at No. 115 and Apple Inc. (NASDAQ:AAPL) being at position 282. However, both companies had positive innovation premium of 29.1% and 10.2%, respectively.
Calculating innovation premium
The ranking reveals companies that are able to identify assets that are innovative in the present day and the future. These are companies whose growth is also being driven by innovation.
The ranking is based on what is called innovation premium, which is essentially the ability of a company to continue generating new growth. The innovation premium is arrived at by calculating the difference between a company’s market cap and net cash flows for the existing operations.
Additionally, the method includes companies whose growth is largely tied to innovation, which means that mining, energy and bank companies are excluded in the list.
The measure excludes industries that are not known to invest in innovation and have no measurable investment in R&D like banks. It also excludes energy and mining firms whose market value is tied to commodity prices. They also caution that their picks do not correlate with investor returns and that if today’s share price includes high-growth expectations, one might anticipate returns to be low.
The process of calculating innovation premium involves projecting cash flows for a company and looking at the net present value (NPV), which is used as the base value. NPV is compared with a company’s Enterprise Value (EV). Where EV is above NPV the company is considered to have innovation premium factors into the stock price.
Facebook Inc (NASDAQ:FB) has been taking strategic assets to expand its offerings and bolster user experience. The company has interest in deeper mobile presence and augmented reality.
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