Closing the Valuation Gap for a Mid-Cap Public Utility Company

Challenge

The company was trading at a significant discount to large-cap peers despite solid operating results, a stable shareholder base, a long history of increasing dividends and established analyst coverage. Rather than repeating a standard perception study, management wanted a more holistic assessment of the factors behind the valuation gap and actionable recommendations for addressing it.

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

• Simplify the investment thesis by focusing on the company’s asset base, growth plan, financial targets and strategic priorities that support long-term value creation.
• Refine the guidance framework to set more achievable expectations and provide greater visibility into segment-level growth drivers, key assumptions, potential new projects and factors impacting earnings growth.
• Provide long-term EPS growth and ROE targets, supported by a clear roadmap for achieving them, to offset operating complexities that contributed to a lower long-term growth rate relative to peers.
• Strengthen core investor materials including earnings communications, the investor presentation and IR website to consistently reinforce the “why invest” narrative and align more closely with larger peers and best practices.
• Enhance sustainability communications and make them more broadly accessible in investor materials, the website and other communications.
• Launch a more proactive Wall Street targeting and marketing program to broaden the investor base beyond utility sector-dedicated investors and strategically pursue new sell-side coverage.

Outcome

The assessment provided management with a clear, actionable blueprint for addressing the valuation gap by simplifying the investment thesis, improving disclosure, refining guidance and aligning investor communications to the best practices of the lead-steer utilities. Following the assessment, the company engaged Financial Profiles to assist its internal team in executing several priority recommendations.

• ValueView360^SM helped management prioritize the communications, disclosure and targeting actions most relevant to its valuation objectives.
• Financial Profiles supported targeted implementation work including providing counsel on guidance and outlook messaging, quarterly earnings communications, an investor presentation update and year-end communications including the proxy statement, sustainability report and annual report.
• The company’s stock price increased nearly 30% in the year following the ValueView360^SM assessment, and the company has continued to grow through organic growth and, most recently, a game-changing strategic M&A transaction.

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