VICTORIA GEDDES, Executive Director.

In the pursuit of market recognition, public companies often find a disconnect between operational excellence and equity valuation. This “valuation gap” frequently stems from misaligned market narratives or overly complex communication strategies.

I recently attended the annual NIRI (National Investor Relations Institute) Conference in Chicago to gain some insights into what is top of mind with IR professionals in the US. This topic was canvased by a panel discussion including two listed companies (Armstrong World Industries and ResMed) and an analyst from the sellside and captures an issue that we frequently encounter when talking to companies in Australia. Their experience suggests that rerating a stock requires more than just meeting financial targets; it demands a strategic overhaul of how a company presents its core value drivers to the investment community.

1. Simplification as a Catalyst for Agility

Conventional wisdom often suggests that more data leads to better transparency. However, providing excessive metrics can create “too many ways to fail” and obscure a company’s primary objectives. Armstrong World Industries addressed this by drastically reducing its primary guidance metrics from approximately 20 down to four key performance indicators. This shift allowed management greater latitude to balance internal levers like volume and price without being penalized for minor fluctuations in secondary metrics. They also provided directional guidance rather than precise unit values for minor variables.

2. Using Real-World Evidence to Neutralize Bear Theses

Market sentiment is often driven by “bear theses” that link a company to broader negative sector trends, regardless of actual exposure. ResMed faced such a challenge when the rise of GLP-1 weight loss drugs led investors to believe the market for CPAP machines would vanish, causing a 40% stock decline in three months. To counter this, ResMed introduced real-world evidence based on insurance claims data for over 2.1 billion patients with diagnosed sleep apnea. The data revealed that patients on GLP-1 drugs were actually more likely to initiate and stay on CPAP therapy. By shifting the narrative from theoretical risk to data-backed correlation, the stock doubled within a year.

3. Differentiating Business Roles Through Segment Disclosure

Investors often struggle to value diversified companies when growth engines and “cash cows” are blended into a single narrative. From the sellside’s perspective, granular segment disclosure allows analysts to model different parts of a business appropriately. Using Armstrong as an example, it’s mineral fiber segment acts as a high-margin “cash cow” (with 43.5% margins in 2025), while its architectural specialties segment focuses on reinvestment and growth. Providing distinct modelling for each segment helped investors understand how cash flow from mature units supports high-growth initiatives, ultimately influencing the company’s trading multiple.

4. Reclaiming the Narrative from Macro Themes

Companies frequently find their stock prices tethered to macro headlines that do not reflect their operational reality. Armstrong experienced this with the “office apocalypse” narrative following the COVID-19 pandemic. Although the office sector was only one driver of their business, negative headlines consistently depressed the stock. Management reclaimed the narrative by providing 18- to 24-month outlooks for each of their specific verticals, forcing a focus on revenue drivers rather than general market sentiment. Also by defining their goals as “growth above market” rather than fixed volume ranges, they successfully differentiated themselves from broader building product peers.

5. The “Goldilocks” Approach to Guidance

Effective guidance requires a balance between precision and flexibility. Experts suggest that while investors dislike ranges so wide they “could drive a truck through them,” overly narrow ranges (such as two cents) lack credibility in volatile environments. Furthermore, vague terminology like “mid-single digits” can be interpreted differently by the market; one company may mean 4-5%, while another implies 6-7%. The ideal is to provide a range that gives enough room for sequential moves over the year while maintaining clarity on terminology. This allows analysts to adjust their models toward the high or low end of a range as the year progresses, fostering trust and reducing earnings-day volatility.

Conclusion

A successful stock rerating is a multi-year journey not a one-time event; it is the result of “intentional thematics.” Two or three key strategic points must be identified and repeated relentlessly until they become the consensus view.

This process builds what we call a “String of Pearls”—a consistent string of quarterly/half yearly strategic wins that, over time, shifts the dial. Each “pearl” is a proof point that the company is executing on the specific strategy promised. When performance consistently meets intentional messaging, the market has no choice but to rerate the stock.

Each company should look at their own performance and ask itself: Is your current valuation a reflection of your performance, or simply a reflection of the story you haven’t told yet?