Wall Street Perception and Valuation Assessment: Five Questions to Consider

If your stock is trading at a less than stellar valuation or is valued differently than key competitors, you may be lacking the information that is essential to both investor relations strategy and corporate planning. Answers to five key questions may help you get a better handle on investor perception and diagnose the impediments to stronger market support.

Which messages are resonating with investors and which are being discounted?

Your company may have a well-planned, proactive and comprehensive communications and messaging strategy – but are you getting credit for your messages? What may be important to management may be misunderstood or discounted by the Street – and this may be limiting a fair valuation for your company’s equity. Even one misunderstood message, metric or milestone may be inhibiting better investor support.

How does Wall Street rate your company’s opportunities and risk profile?

Investors pay close attention to a company’s risk factors – but is risk mitigation a part of your company’s investment thesis? It should be. Investors may not fully understand how your business model and strategy removes inherent risk and positions the company to maximize its business opportunity.

How does your shareholder mix compare to your more highly valued peers and what does this imply for share support?

Comparative 13F analysis can go a long way in determining where a valuation gap exists between your company and its peers. Your targeting strategy may need to be refreshed in order to increase your exposure to investors with different investment styles and holding patterns, and garner more robust institutional support overall.

Which subset of companies is driving valuation hurdles for your peer group and why?

Analysts and investors may be classifying your company within a suboptimal peer set. Often, companies need to create their own category of peers to better match fundamentals such as company lifecycle, vision, markets, capital allocation strategy, and innovation. When analyzing valuation metrics versus peers, disconnects may be found that should be explained through enhanced communications.

What do your stock’s liquidity and trading patterns imply in terms of current valuation?

A comprehensive analysis of share price fluctuations, volume, trading correlations, beta, short interest and insider activity may provide the answers.

Understanding the reasons behind your valuation is the first step to addressing a valuation gap. With thorough answers to the questions above, your company can be in a better position to engage in productive dialogue with investors and analysts to influence greater and sustainable Wall Street support.

Contact Financial Profiles for a quantitative and qualitative look at valuation issues impacting your company’s stock.