UK companies are struggling to keep up with peers on growth

UK companies are failing to keep up with international peers on sustained growth, data from Panmure Liberum has revealed.

While practically all companies manage to create strong growth on occasional years, few companies have managed to keep growth going every year, noted Joachim Klement, investment strategist at Panmure Liberum.

The longest streak on record for a company to post more than 10 per cent revenue growth every year was Amazon, which managed 24 years before it was broken in 2022.

For the UK, the longest streaks have been professional services company Capita (20 years from 1990 to 2009) and online retailer Asos (17 years from 2005 to 2022).

Since their streaks were broken, Capita’s share price has dropped 96 per cent, while Asos has seen an almost 40 per cent drop.

The US outperforms the UK and EU, with 137 (9.1 per cent) of its stocks growing more than 10 per cent for 10 consecutive years. This compares to just four per cent of European and British stocks.

Looking at the current longest ongoing streak of at least 10 per cent revenue growth annually, and the UK is far behind.

Who is doing the best, from Britain?

Britain’s best performer is AIM-listed fintech Alpha Group, which has grown revenue by more than 10 per cent every year for the last nine years.

This compares to the best American performer, Lululemon, which has had 19 years of strong consecutive growth, and Europe’s Fortnox, with 16 years of straight growth.

Second place in the UK goes to AJ Bell and JTC, with only eight years of consecutive growth, easily outclassed by American Insulet (18 years) and European Evolution Gaming (11 years).

When controlling for GDP growth, as countries with slower growing economies will have slower growing companies, the situation is even worse for the UK.

The share of British companies with consecutive sales growth at least five per cent above GDP is significantly behind both the US and Europe.

“In short, European markets have a growth problem, at least compared to the US,” said Klement. “As long as that growth problem persists, I think a valuation discount of European stocks to the US is warranted.”

“But is the current valuation discount of more than 30 per cent for the UK and more than 20 per cent for the European market versus the S&P 500 warranted? That is an entirely different question,” he added.