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When meeting with management teams we often hear the phrase, "nothing has really changed". Clients are usually referring to the fact that their strategic plan hasn't changed significantly because either they are on track to meet their objectives or they might be headed sideways and haven't met their objectives. As a result it appears as though "nothing has really changed". Yet, when considering value, its important to remember that achieving and conversely missing targets impacts the risk profile of the investment. A company that has consistently met its objectives, albeit at times small objectives, is serving to reduce the perceived risk of an investment in the company and hence building value. Conversely, a company that is headed sideways and possibly simply maintaining its revenue numbers, yet failing to truly hit its targets is often proving to be a riskier investment than once thought and thus eroding value. So as we analyze how and if value is moving from quarter to quarter, its certainly rare that "nothing has really changed".

Category(s): Valuation Thoughts
Posted by Brett Suchor at 01:51 PM | Permalink | Comments (0) | TrackBacks (0)