McKinsey Classics: The problem with TRS

McKinsey Classics | March 2017

The US stock market has been testing record highs. But do short-term share prices and total returns to shareholders (TRS) truly reflect a company’s long-term prospects? TRS measures performance against the financial markets’ changing expectations. Companies that consistently meet high performance standards can find it hard to deliver high TRS: the markets may think that management is doing a great job, but this belief has already been factored into share prices. Two other metrics—market value added and the market-value-to-capital ratio—can compensate for these deficiencies. To learn more, read the classic 2005 article “Measuring stock market performance.”

Learn about other metrics

Related reading

An early warning system for asset bubbles →

Communicating with the right investors →

The irrational component of your stock price →

Did you miss our previous McKinsey Classics?

Doing more for less in the public sector

As a new administration comes to Washington, we offer insights on how a lean approach could not only cut the cost of government programs but also make them more effective and the work of federal employees more meaningful.

What is lean government? →