Addressing a Valuation Gap for a Growing Small-Cap Engineering Services Company

Challenge

Following a successful business model transformation that positioned the company to deliver higher returns and materially higher earnings growth than peers, the company’s stock was trading at a significant discount across every valuation metric.

ValueView360^SM Assessment

Leveraging our ValueView360^SM process, Financial Profiles conducted a comprehensive analysis of quantitative and qualitative factors to identify the key issues contributing to the company’s valuation gap.

Recommendations

• Refresh investor messaging and communications materials to more clearly communicate the company’s business transformation, customer engagement model, shift to higher-margin business and growth outlook.
• Reframe quarterly earnings communications to present results and achievements in the context of the stated strategy and reinforce execution.
• Address modeling challenges by providing context around margin expansion, cash flow generation, a strong balance sheet and factors driving long-term earnings growth.
• Create investor presentation and quarterly earnings highlight videos featuring the CEO.
• Help the sell-side build more accurate models and expand sell-side coverage through targeted outreach to next-tier firms.
• Strengthen the shareholder base through a strategic targeting program to attract top-tier small-cap institutional investors.
• Enhance corporate reputation and Wall Street visibility through financial media, broadcast news, bylined content, awards and social media.

Outcome

Following the ValueView360^SM assessment, Financial Profiles was engaged to help implement the recommendations by executing an integrated IR and PR program. Two years later:

• The company’s stock price and market cap had nearly doubled, supported by strong company performance and elevated investor communications.
• Investor communications became more focused and consistent across materials and channels.
• New sell-side firms, including Stifel and J.P. Morgan, initiated coverage, bringing total sell-side coverage from two to five firms.
• Institutional ownership increased nearly 30%, reflecting positions initiated by priority target investors such as T. Rowe Price, Fidelity, Loomis Sayles and Wasatch.
• Visibility expanded through media coverage in The Wall Street Journal, Fortune, CFO Journal, Bloomberg, Yahoo! Finance, Schwab, Nasdaq and Forbes Council, as well as recognition in Newsweek’s Top 100 Most Loved Workplaces and Best Practice Institute’s Most Loved Workplaces across six categories.

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