More than 80% of European listed companies think their performance isn’t
accurately reflected in their share price – and that analysts don’t fully
understand the fundamentals of their business.
The damning statement comes from a survey conducted by accounting firm
At the same time, senior company executives believe analysts are the most
effective market influencers.
The survey, launched in spring, initially targeted UK companies but was
extended to companies across Continental Europe in early summer.
RSM received 190 responses from companies of all sizes, from over 30 sectors
and in eight countries.
Their market capitalisation was around €120bn. Respondents ranged from
chairmen and chief executives to chief finance officers and heads of investor
Among the respondents, 16% believe that analysts really understand the
fundamentals of their company and 23% believe that analysts have poor,
or no knowledge; less than 40% have a specific strategy for enhancing market
value; only 51% companies believe that share price is important to strategic
decision-making and 12% feel that their strategy is not understood by the
RSM International chairman Chris
Connor, believes this is a prime opportunity for the profession to step in,
to help clients put out the message about their companies.
‘Analysts are the ones who seem to have the biggest impact. I think the
accountants need to help with the explanation of market value,’ said Connor.
‘But how do you communicate with the market effectively? You start by
checking what the market wants to know, as some markets rate company value on
the basis of cash flow, while others place value on earnings per share, or the
return on capital.
‘If you’re in an arena where net cash flow is the best measure, and all you
talk about is earnings per share, you may not hit the mark.’
He also suggested that auditors could even spend more time with analysts so
as to better understand their needs.
‘Accountants work in commerce and industry. I’m not suggesting it is the role
firms to start explaining a company’s value to analysts, but clearly accountants
in firms can help clients to get the message of their company’s value over by
explaining this to clients and getting them to understand the role of business
in shares on the market,’ said Connor.
RSM International plans to repeat the Market Value Survey on an annual basis
to trace movements in European listed companies’ perceptions of value.
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