Sunday, December 16, 2007

Vital Sign: Competitiveness Rating. Top 40 Most Competitive Companies in 2007

According to "Most Competitive Companies 2007", a report on competitiveness of consumer oriented companies, a Competitive Rating (CR) represents a company’s ability to earn a consistent profit above their cost of capital, and their ability to protect that profit through multiple sources of ompetitive advantage with consumers.

The Top 5 Competitive Companies:
1. Google Search
2. Bud / Bud Light
3. Coca-Cola
4. Food Network Channel
5. Under Armour

The last two were a surprise, given that recent revenues for FNC and UA were less than 10% of the top 3 in the list.

According to W Ratings, the author of the report:
The competitiveness score is calculated by percentile, ranking companies by their average economic profit over the past five years and by their total moat score, and weighting those rankings equally into one score.

"Economic profit" is defined as a company's return on invested capital in excess of the company's weighted average cost of capital. Additionally, W Ratings measures a company's ability to achieve a higher economic profit than its rivals and sustain that competitive advantage through "moats," a term popularized by investment guru Warren Buffet when describing the qualitative measurement of a company's ability to keep competitors from penetrating their market for an extended period of time. Total moat score is derived from a consumer survey database and is defined as the sum of nine areas of competitive advantage with each area, or moat, measuring between negative one and five. The more moats and higher total moat score indicate a higher likelihood of sustaining a competitive advantage with consumers. To be considered, companies must have either a dominant market share or wide recognition among the general U.S. population and have publicly available financial data. Sectors surveyed comprise retail and consumer goods, media and communications, financial services, travel and leisure, and restaurant and beverage.

Report available as a download here: