It is never easy to know exactly when to make investments and when to pull back and drive efficiencies. This is especially true for investments like R&D, marketing and training where the future cash contribution is quite often difficult to quantify and the investment hits the P&L immediately. However, by looking systematically at the business and externally at the markets and competitors over time, management often finds insights on how best to make growth vs. return tradeoffs.
Our expertise is in providing a differentiated and external perspective on these tradeoffs and helping develop actionable strategies to address them. We have designed “A View from the Investor’s Shoes” to bring key insights to management from the market’s perspective.
We put ourselves in the shoes of a sophisticated buy-side investor and provide management with a rigorous view of the company from the perspective of the equity capital markets. We will identify the key factors affecting investors’ decisions regarding the company’s stock, including:
- Overall Market and Industry Conditions: Isolate market effects so management can separate factors outside their control and direct their efforts toward controllable aspects.
- Current Long Term Expectations: Quantify the long-term expectations for growth and returns embedded in the company’s share price to provide insights on the performance needed to drive the share price higher. We apply our “Postmodern Corporate Finance” analytical framework but translate the results.
- Peer Analysis: In addition to looking at the company, we look at the high-level historical performance, valuation and future expectations of key peers to understand their valuation and strategies.
- Sensitivity Analysis: We prepare sensitivity grids to help management understand the relative importance of each major driver of performance so strategic discussions can focus on areas where the impact will be greatest.
Our clients benefit from this diagnostic phase by better understanding and establishing baseline performance targets based on investor expectations. Although our analysis is prepared using our unique analytics, we recast the analysis into standard revenue growth, EBITDA, capex and related metrics to facilitate discussion with managers and possibly the board and investors.
To find out more about ‘A View from the Investor’s Shoes’, please click here for a more detailed description or contact us.