When I talk with CEOs of public companies, I often hear the same complaint: “investment analysts don’t get us.” These CEOs perceive a gap between the value they see in their own company and the market value. They feel that analysts who track their stocks just don’t understand the long-term potential of their company. 

And these CEOs’ frustrations aren’t unfounded. The investment analysts make recommendations that influence the share price — and they use processes that are outdated at best, that have been designed to make your company as boring as possible, and that reflect mainly historical performance as opposed to future growth.

You’re likely not in a position to reform analysts’ research processes, as frustrating as those processes might be. But that doesn’t mean you’re powerless to influence their work and, ultimately, your share prices. To help bridge the gap between your own understanding of your company’s value and the existing market value, you can help analysts to reframe their perspectives. This reframing can take two forms:

Reframing perspective.

If you are going to be compared to other companies, you can help position who you want to be compared to. Think of toy stores. Should they be compared to other general merchandise stores or to entertainment companies? Spinmaster has played this well. They do investor days to educate analysts about  their composite business of toys, digital games and entertainment. What about hotel companies? Are they closer to other hotels, real estate and housing stocks — or maybe to hospitals, in that they both are spaces for the delivery of value-added services?

Some companies take this approach in their investor day presentations; others, in their day-to-day conversations. What is essential is that this reframing is well-thought-out, constant, and consistent across all channels. Only once this narrative has been unequivocally established internally should this reframed understanding of your market be shared with the investor community.

Looking beyond today.

You have to be careful about forward-looking statements to avoid both regulators and a lawsuit. Yet you can still find ways to talk about the future of your business. Most of the best companies have public-facing innovation narratives or growth platforms. They use these as frameworks for updating investors on their progress. On LinkedIn, I often share some of the best examples. One I particularly like is McDonalds’ 4Ds: digital, delivery, drive-through and restaurant development. Each paints a clear picture of how technology and consumer attitudes — as well as their own investments — will improve the business over the long term.  

If you don’t develop an innovation narrative, then your company is going to be considered from a historical perspective. How are you performing compared to years and quarters past? Driving sustainable long-term growth will likely require changes in priorities (and changes in performance). You may decide to open fewer stores next year or to generate revenue from services vs assets under management. If the share price is the current value of future cash flows, everyone needs to be on the same page about the strength of those numbers to get to the right market value.

Helping others see you the way you see your company is a long-term commitment. Consistency and authenticity will win over many skeptics. With management often being large shareholders of their own companies, this investment could generate some real returns. It all starts with reframing your understanding of your market.

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If you want to learn more, get in touch and let’s chat!