“First, the goal of investor relations should be to align the share price with the intrinsic value of the company. It’s not helpful to be below that value, obviously, but it’s also not helpful to be above it, because at some point the share price will come down to what the company should be worth and that can happen quickly.”
- Werner Rehm, McKinsey & Company
Investor Relations (IR) is pivotal in shaping corporate narratives and investor perceptions. Financial models can significantly enhance these efforts by providing clarity, trust, and actionable insights. Here’s why integrating financial models into IR strategies can be transformative:
Education / Clarifying Financial Narratives
Sell-side and buy-side analysts build models to ensure they have a clear framework to forecast and value a company. This process educates themselves and their clients about a company’s financial prospects. Financial models simplify complex financial data, making it accessible and understandable. Leveraging this process more broadly within IR can align stakeholders on the same financial narratives, enhancing informed decision-making.
Trust / Building Confidence Without Forward Guidance
Financial models foster transparency and trust without the need for forward guidance. By providing a clear, detailed view of the company's financial status and potential, these models help stakeholders independently assess value. This transparency builds confidence among investors, ensuring they have a solid understanding of the company's value drivers.
Insights / Speaking the Investor's Language
Using financial models allows IR teams to speak the same language as investors and analysts. Through this shared dialogue, IR teams gain a deeper understanding of what investors focus on and how they value the business. This alignment ensures that communication is more effective and targeted, addressing investor concerns and interests directly.
Driving Equity Analysis and Market Engagement
Comprehensive financial models can alleviate the analytical burden on equity researchers, particularly in the post-MiFID II environment where research coverage has declined. Providing ready-to-use financial models encourages more analysts to cover the stock, improving visibility and market engagement. This increased coverage helps maintain liquidity and investor interest, crucial for sustaining market activity.
Stellar Fusion Interactive Financial Models
Curious about our financial models? Visit our interactive demo page to explore how they work and learn how you can enhance your IR strategy.
