Growth is not a source of value in itself because it consumes financial resources without guaranteeing that these will generate wealth greater than their cost. The only real source of value creation is financial performance.

Here is the detailed explanation of this amplification mechanism:

1. Financial performance as the only source of value

Value creation does not come from the volume of activity or the size of the company, but from performance. This is defined by the ability to generate a return on capital employed (ROCE) that is higher than the cost of the resources mobilized to finance them (the Weighted Average Cost of Capital or WACC).

• It is this differential (Profitability – Cost of Capital) that constitutes the Economic Profit (Economic Profit or EVA). As long as this differential is not positive, there is no value creation, regardless of growth.

2. Growth as a consumer of resources

To grow (increase its revenue or balance sheet size), a company must invest. This implies increasing its invested capital (industrial investments, working capital requirements). Growth therefore corresponds first and foremost to a consumption of cash.

3. The amplification mechanism (Accelerator)

Growth acts as a multiplier applied to financial performance. It amplifies the result, whether positive or negative.

The sources illustrate this mechanism through three scenarios:

• Scenario A: Positive Performance (Value Creation)If the company is performing well (ROCE > WACC), then growth creates wealth. Investing 200 instead of 100 multiplies the surplus value. Example: With a profitability of 20% and a cost of 7%, investing 100 creates 13 of value. Investing 200 (growth) creates 26 of value. Here, growth amplifies the gain.
• Scenario B: Negative Performance (Value Destruction)If the company is not performing well (Profitability < WACC), growth accelerates the destruction of wealth. Example: With a profitability of 4% and a cost of 7%, investing 100 destroys 3 of value. If you try to “make up for it on volume” by investing 200, you destroy 6 of value. Growth has amplified the loss.
• Scenario C: Zero Performance (Neutrality)If the profitability is exactly equal to the cost of capital (EVA = 0), growth has no impact on the value. Moving from a growth rate of 5% to 8% does not create any additional value if the economic result is zero.

Conclusion

Growth is not a strategic objective in itself, but the consequence of a successful investment policy. If the EVA is negative, seeking growth only accelerates the destruction of value for shareholders.