As promised - thoughts on achieving a full valuation
A few weeks ago, I trailed the publication of a white paper on how to help analysts attach the full premium to a company’s financial valuation. The paper was published this week in conjunction with the National Investor Relations Institute’s (NIRI) annual conference in San Diego.
The white paper calls for companies to provide greater transparency on assets that are not mandated by disclosure regulations but which contribute to the overall value of a company.
According to the authors – the Disclosure Advisory Board - the investment community has become increasingly focused on near-term financial metrics as the primary means for evaluating a company. Non-financial value drivers, such as presenting a clear corporate strategy and creating explicit links between research and development spend and new revenues, are difficult to monetise on a balance sheet. They also require investors to take a longer-term outlook.
Among the challenges faced by investor relations professionals in communicating adequately to the markets are getting internal access to sufficient data in the first place, to management concerns about disclosing detailed and forward looking information, to inadequate consistency of reporting.
Unfortunately, the mandated disclosures from most companies do not allow analysts to apply fully a premium to their growth potential. And companies whose stock market valuations do not accurately capture their non financial value drivers need to widen their communications.
And - as the paper argues – no one is better placed to create and communicate these links than a professional IRO.
The white paper calls for companies to provide greater transparency on assets that are not mandated by disclosure regulations but which contribute to the overall value of a company.
According to the authors – the Disclosure Advisory Board - the investment community has become increasingly focused on near-term financial metrics as the primary means for evaluating a company. Non-financial value drivers, such as presenting a clear corporate strategy and creating explicit links between research and development spend and new revenues, are difficult to monetise on a balance sheet. They also require investors to take a longer-term outlook.
Among the challenges faced by investor relations professionals in communicating adequately to the markets are getting internal access to sufficient data in the first place, to management concerns about disclosing detailed and forward looking information, to inadequate consistency of reporting.
Unfortunately, the mandated disclosures from most companies do not allow analysts to apply fully a premium to their growth potential. And companies whose stock market valuations do not accurately capture their non financial value drivers need to widen their communications.
And - as the paper argues – no one is better placed to create and communicate these links than a professional IRO.
posted by Mark Hynes @ 12:30 pm
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