Capital Markets: Observations & Insights

III

The Growth Advantage Style Wars

• Three variables drive P/E multiples: growth, return on capital, and risk

I

• The Russell 1000 Growth Index has higher expected EPS growth, higher return on equity, and lower risk in the form of better balance sheets as compared to the Russell 1000 Value Index

II

Stronger Growth

Higher Returns

Lower Risk

Long-Term EPS Growth

Net Debt / EBITDA

Return on Equity

III

2.8x

29.6%

IV

14.1%

0.9x

11.5%

7.3%

V

Russell 1000 Growth

Russell 1000 Value

Russell 1000 Growth

Russell 1000 Value

Russell 1000 Growth

Russell 1000 Value

VI

Source: FactSet as of 12/31/19. Growth represents consensus long-term analyst estimates and actual future EPS growth rates might be materially different than the forecasts shown.

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