The Premium Valuation Framework

Enhance shareholder value by ensuring your company's story is clear, compelling, and connected to the right people in the capital markets

The Premium Valuation Framework

The Premium Valuation Framework 1024 576 Investor Relations - Market Climber Inc.

One of the primary responsibilities of boards and management teams is to sustainably enhance shareholder value. While the occasional discount in a company’s share price can be a nuisance, it is often of little consequence. A persistent discount, however, can harm a company through:

  • Increased cost of capital;
  • Lower value accretion from acquisitions;
  • Reduced compensation which hinders the attraction and retention of employees; and
  • Challenges to control from shareholder activists and other predators.

Any company can experience an unfair discount in their value. Unfair discounts arise when the market does not understand or is unaware of a company’s value proposition and relevance. Discounts also arise when a company competes for capital in the wrong arena. Both scenarios cause analysts and investors to assign an inappropriate value to a company.

Unlock and Enhance Shareholder Value

The Premium Valuation Framework can resolve unfair discounts to unlock and enhance shareholder value. Over the long-term, this framework will also mitigate the harmful effects described above. The three pillars of the Premium Valuation Framework ensure your company’s message is clear, compelling and connected:

Clear – Ensure The Market understands your Business

Does the market understand your business story? Providing an understandable story is the foundation of the Premium Valuation Framework. No amount of flash or relationship management will overcome a misunderstood story. This is also the most difficult aspect for management teams to address. Most management teams suffer blind spots because of their intimacy with the business, unique language, and inability to get honest market feedback. Learn more about how we help companies to be clear here.

Compelling – Ensure The Market Understands Your Potential

Does the market understand your strategy? The market rarely understands the potential of companies that neglect to package their story in a compelling manner. As a result, these companies fail to gain the attention of the market. A compelling package includes the use of powerful visuals in investor presentations, quarterly webcasts and proxy materials to drive increased share of mind, recall, and positive intent. Companies should also leverage prezi, video, animation, and infographics where appropriate. However, the most important element of a compelling investment is the launch of a five-year strategy that clearly lays out the company’s potential. Learn more about how we help companies deliver a compelling story here.

Connected – Ensure you Reach the right people in the markets

Do you have the right relationships in the capital markets? Relationships with the right people will make all the difference to a company’s trajectory. Unfortunately, it is more difficult than ever to identify, target and build these crucial relationships. Disruption, caused by new technologies and regulations, mean:

  • Equity sales desks have shrunk to a fraction of their former size – this means new buy side relationships are more difficult to forge;
  • Fewer analysts are stretched to cover more companies – this makes garnering and maintaining accurate research coverage a challenge ;
  • Funds have moved from active portfolio managers to passive investment vehicles – which means there are fewer active portfolio managers to target; and
  • Brokers are weighed down with new regulations and compliance requirements – which means there are fewer resources to apply to your story.

Even large-cap companies struggle to navigate the increased complexity of today’s market. Find out how we help companies connect meaningfully with the capital markets here.

The premium Valuation Framework in Action

A company’s base valuation is defined by their performance, macro economic environment, market awareness, and market expectations. Each element of the premium valuation framework layers additional market value on top of a company’s base valuation. By resolving misperceptions, clarifying the message, layering in compelling communication tools, and connecting the entire package to the right people in the investment community, we can help any company achieve a premium valuation.