In the latest Nordea On Your Mind report Johan Trocmé, Viktor Sonebäck and Ebba Ramel from Nordea’s Thematics/Researach Insights team revisit the concept of financial targets.
While setting targets and being held accountable to them may seem like a nuisance to many company leaders, a quantitative analysis made by the team shows that when looking at stock-market development, companies that use financial targets outperform businesses that don’t set financial targets.
The team has studied the period from 2007 onwards and found that companies that use operational targets, such as growth, margin or return related goals, instead of strategic targets have seen a ~50% share price outperformance. A strategic target may be a payout or leverage goal, more or less designed to always be met. The companies that have reached or beaten their set operational targets have outperformed another ~50%.
There are clearly financial benefits related just to setting financial targets. Find out more by listening to the latest Nordea On Your Mind podcast. You will also learn what kind of targets investors prefer and how they may differ from what companies tend to focus on.
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