Market Perception Index
July 20, 2011
Senior Managing Director, Strategic Communications
Companies dedicate substantial resources to communicate their strategies, business models and investment propositions to the financial community with the goal of optimizing their valuations. However, these communications often miss the mark because management teams do not fully understand the perceptions of investors and analysts, and as a result they tell an investment story that is misaligned with what is being rewarded by the market.
What performance is the market rewarding, and what is driving intangibles
What drives valuation in the financial markets is an extremely complex calculus based on the relationship between realities and perceptions across the continuum of time from the past to the present, culminating in expectations for the future. Certainly, past and current performance matters, as it establishes the framework for assessing the future. But since the market is a forward-looking discounting mechanism, gaps between internal and external perceptions and expectations often lead to a suboptimal valuation.
Those perceptions affecting valuation are multifaceted, not binary, and most companies do not have a comprehensive understanding of the interplay among the many dimensions of perception that exist about them. Nor do they understand which perceptions are most influential in ultimately driving valuation.
It is with this in mind that FTI Consulting developed the Market Perception Index (MPI) as a strategic framework designed to help companies optimize their enterprise value by better understanding the drivers of valuation and the intangible factors that account for either undervaluation or overvaluation within the context of their industry.