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Capital Allocation

 

 

 

 

 

 

Capital Allocation & Portfolio Management 

A company can be viewed as a portfolio of projects, products and services – some already in place and generating cash, while others still in development but with good growth potential. Although many companies are striving for innovation, it is the ability to find a balanced mix between cash-generating projects and future growth opportunities that enhances shareholder value.

The market’s recognition of growth potential is reflected in the share prices of growth companies, which typically enjoy a significant premium over the value of assets in place.  It is vital, therefore, for managers to appreciate which products are driving value creation within the company portfolio. The Real Options Group develops tools that help companies understand, assess and manage their product portfolios in a way that enhances shareholder value.

With our Real Options Performance Matrix™ we can benchmark the performance of different products in the portfolio (given the amount of risk relative to their industry) and identify those generating the most value and others that are under-performing.  Using our Real Options Growth Matrix™ we can map out each product or project to identify how they fit in the company’s portfolio in Net Present Value vs. growth potential space. Using this information and our Real Options Action Matrix™ we can help managers execute actions and tailor value-enhancing strategies for their projects. Some projects may be expanded, some abandoned, and others deferred or sold for cash.