Good or Bad?

02 May 2008

What makes a good IR department or good IR program??Good_or_bad
I have heard those who say “Oh, their stock is down X% so their IR program must be poor”.  The truth is that the stock is probably not down because of a poor IR program.  Chances are very good that the stock is down because of poor company results.

 So how do you judge if an IR program is good or not?
There are many metrics that one can look at beyond absolute stock price performance:
• Stock performance versus peers/competitors.
• Stock performance versus industry indexes.
• Long-term investment returns (5 years or more).
• Revenue multiples.
• Earnings multiples.
• Short positions.
• Beta factors (volatility).
• Market capitalization versus peers.
• Average daily trading volumes (share liquidity).
• Ownership profiles.
• Turnover among top shareholders.
• Quantity and quality of analyst coverage.
• Analyst recommendation breakdown.
• Investor marketing activity.
• Size and quality of IR database.

This list of fancy terms can go on and on.  These are great for IR junkies, like me.
However, there is an easier way to breakdown weather an IR program is good or not, and here it is:

If a company is performing well, has been meeting or exceeding expectations, and is in good financial position, then shareholders should be rewarded by a higher moving stock price.  If not, then we need to look at the IR program to see what is going wrong.

If a company is not performing well then the stock will get hit (in some cases, quite badly) no matter how great the IR program is.  However, in this scenario, if the reputation of the management team and the company remains in tact, and investors and analysts see optimism in the future of the company then the IR program has succeeded.

In the end – you should not always judge an IR program by the company’s stock chart.

One Response to “Good or Bad?”

  1. Stock Market » Blog Archive » Good or Bad?

    PingBack from http://stock-market.tedtheblog.info/?p=13336

Leave a Reply