Growth vs. Quality of Growth: Public Equity and Private Equity perspectives

In today’s capital markets, few metrics are tracked as closely - or celebrated as readily - as top-line growth. Increasing revenue is often viewed as a reliable indicator of business health, market momentum and executive effectiveness. However, the increasing complexity of global markets, investor expectations and competitive pressures has led to a more critical evaluation of not just how much a company grows, but also how that growth is achieved.

This distinction between top-line growth and the quality of that growth is becoming a defining factor in value creation - particularly when viewed through the different lenses of public corporations and private equity-owned firms.

1. Top-Line Growth: an Incomplete Metric

Top-line growth, or revenue expansion, remains a foundational metric in business performance assessment. In both public and private contexts, growing sales often leads to greater market share, brand visibility and investors interest.

However, top-line alone does not convey whether growth is:

• Profitable

• Sustainable

• Strategically aligned

• Operationally scalable

Companies can grow revenue rapidly while diluting margins, increasing customer churn, or creating dependencies on price discounts or volatile geographies. In such cases, growth may mask underlying weaknesses - temporarily inflating valuation but eroding structural health and long-term competitiveness.

2. Defining the Quality of Growth

High-quality growth is characterized by financial, strategic and operational attributes that make revenue expansion durable and value-accretive. These typically include:

3. Public Companies: the Long-Term Growth Mandate

Public companies operate under ongoing scrutiny from analysts, institutional investors and proxy advisors. In this context, quality of growth becomes central to sustaining investor confidence and long-term valuation.

Boards and shareholders increasingly prioritize:

• Margin-accretive growth over top-line expansion that dilutes profitability

• Capital efficiency, including ROI on organic and inorganic growth initiatives

• Strategic clarity, particularly in terms of core vs. non-core business scaling

• Environmental, social and governance (ESG) integration, reflecting long-term societal alignment

Growth that fails to meet these standards may be penalized in the form of lower valuation multiples, rating downgrades, or shareholder activism-even when revenue is rising.

4. Private Equity: Growth Under a Defined Time Horizon

Private equity investors typically operate on a 3-7 year investment cycle, with a sharp focus on driving enterprise value in preparation for an exit. While top-line growth remains important, it is only valued when it translates quickly and clearly into EBITDA growth and enhanced cash flow.

Private equity firms emphasize:

• Revenue expansion through pricing power and cross-selling, not just volume

• Operational efficiencies that support scalable growth without margin erosion

• Platform-building capabilities, such as acquiring bolt-ons that strengthen product, geographic, or channel reach

• Exit-readiness, with clean financials, de-risked forecasts and clearly articulated value levers

In this context, growth is instrumental, not aspirational. Revenues that cannot be operationalized or monetized quickly are often deprioritized, especially if "distracting" from core value creation strategies.

5. Growth Quality and Valuation Multiples

Across ownership models, there is growing recognition that high-quality growth commands a premium in valuation. Companies that can demonstrate growth that is:

• Profitable

• Predictable

• Scalable

• Strategically coherent

...are consistently rewarded with higher EV/EBITDA and EV/Revenue multiples.

Conversely, businesses with volatile, low-margin, or unsustainable growth profiles are often subject to valuation discounts - even when headline revenue figures appear strong.

6. Strategic Imperatives for Leadership

For executive teams, this shift has practical implications:

• Growth strategies should be multidimensional, encompassing pricing, product innovation, customer experience and operational leverage-not just volume or market share.

• Resource allocation should align with growth quality, prioritizing segments and initiatives with the highest return on capital, not just the fastest sales velocity.

• Forecasts must be stress-tested, not only for top-line assumptions but also for the durability of margins and working capital requirements.

• Cultural readiness matters: sustainable growth often requires strong cross-functional alignment and organizational agility, especially when scaling rapidly.

Conclusion: Growth that Builds Enduring Value

For experienced international executives and investors, the message is clear:

1. top-line growth remains essential, but its true value is realized only when paired with profitability, resilience, and sustainability. Investors, boards, and acquirers want to understand whether revenue is being built on a foundation of efficiency, resilience and strategic intent.

2. Private equity’s evolving playbook demonstrates that it is possible-and increasingly necessary-to drive rapid commercial expansion while building businesses fit for the future. By focusing on the quality of growth, leaders can unlock superior returns, attract premium buyers and leave a lasting positive impact on their industries and communities.

3. Top-line expansion may catch attention - but high-quality growth earns trust, drives value, and builds companies that endure.

4.  In today’s market, the winners will be those who deliver not just more growth, but better growth. As global executives and investors recalibrate their expectations, the ability to deliver sustainable, high-quality growth will define the next generation of market leaders.

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Gianni Cossar is an international executive specialized in P&L growth and business turnaround for multinational corporations and Private Equity-backed ventures. He brings deep strategic and operational expertise with a strong track record across Europe, Asia and the Middle East.