The most innovative companies grow their sales—and their stock prices—faster.
- Academic studies1 and Alger’s research suggest that the most innovative companies, as indicated by R&D as a percentage of sales, often outperform. For example, the most innovative companies of the S&P 1500 a decade ago produced earnings per share growth that was several hundred basis points higher than the least innovative companies over the subsequent 10 years.
- In addition, the most innovative companies in the S&P 1500 outperformed the least innovative companies over the past decade by a significant margin (see chart).
- Companies that identify and act on opportunities for change through innovation will not only survive, they will flourish. As their stock prices grow, the benefits will accrue to investors.
1 Baruch Lev and Suresh Radhakrishnan, “The Stock Market Valuation of R&D Leaders".