Capital Markets / Investor Relations in Two Minutes or Less
The Consequences of Taking a Quarter Off – Part 1
Public companies, right, wrong, or indifferent, are judged primarily on their business performance in a given quarter.
The performance of company in question can be judged on a myriad of metrics both financial and operational.
Ultimately, every public company has one or more golden metrics whereby management must exhibit some sort of performance or face value destruction of some form.
Successful earnings can be as simple as executing well on one or more golden metrics.
Example: Data Center Real Estate Investment Trusts (REITs)
The golden metrics of data center REITS revolves around the number of Megawatts (MW) leased in a given quarter.
Leased MW > X,
X represents a combination of management and investor expectations, the stock will react positively, and go up.
Leased MW ≤ 0,
The stock will react poorly, and go down.
All other data and performance will be secondary to underlying stock performance and valuation.
Every company public or private has golden metrics!
More importantly, public company executives can inadvertently create golden metrics without realizing they are doing so!
An Interesting Story About Data Center MW Leasing
There once was Data Center A with no available MW inventory that turned down a significant lease from a high-quality customer.
A smaller, unstable Data Center B with no available MW inventory accepted said lease from a high-quality customer.
Investor feedback held that Data Center A should have accepted the lease and created a backlog.
A company is not in business to provide business to competitors!
Key Learnings
Golden metrics always drive stock valuation. Do you know your golden metrics?
A management team can create its own golden metrics, many times inadvertently! Are you mindful of this possibility?
Consistent performance across golden metrics is key.
Consistent and stable execution on golden metrics over numerous quarters always unlocks shareholder value!
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