Why is your company trading at a relative premium or discount to its peer group? Consider these nine factors, says OCE Interactive.
Vincent Ryan, CFO.com | US
March 3, 2011
Sustainable increases in stock price happen when 1) companies serve customers in attractive, growing markets, 2) deliver products and services that generate differentiated value to those customers, 3) continuously develop and execute strategies to improve their positions in ever more attractive markets, and 4) communicate those strategies and resulting expectations effectively to their investors. Doing these things also puts companies in position to deliver the kinds of end results and metrics referenced in the article. Unfortunately, the end results and metrics referenced in the article can also be generated by a multitude of inappropriate, value-destroying and unsustainable actions. These nine metrics are better described as investment screens, and certainly not primary value drivers.
Posted by Gregory Stoklosa | March 04, 2011 04:29 pm
My firm Jackson Hole Advisors has been advising p.c.'s for 40 years and if one believes that the market valuation process is limited to fundamentals is way behind the curve. With algo programs and the extreme use of leverage we see many p.c.'s being traded more like a commodity being totally disconnected from any fundamental valuation. We see p.c.'s with 13-f holders reporting 100-200% ownership of the float! Leverage-Leverage-Leverage. You have to be able to see behind the market.
Posted by Don Kundinger | March 04, 2011 10:38 am
I found this article to be extremely informative and insightful. It's pretty clear that OCE Interactive has developed a fresh and useful set of valuation tools. I'm a bit confused, though with #8 - Fixed Cost Moat. Why is it a foregone conclusion that companies with high fixed costs have a greater investment in assets, resulting in a lower asset turnover ratio? Also, I understand that a lower turnover ratio is indicative of a more capital intensive business, which may present certain barriers to entry. However, I've always subscribed to the notion that higher asset turnover ratios are preferable, particularly when you compare these ratios to your peers. Stated differently, because assets represent cash investment, often permanently, the optimum level of assets a business should strive for is $-0- (obviously not practical, but I use this to illustrate my point). How does one reconcile, or more appropriately, balance, the two opposing views?
Posted by Jeff Moskovitz | March 04, 2011 08:24 am© CFO Publishing Corporation 2009. All rights reserved.