There are a number of ways a company can help its stock price increase
As a CEO or company director, you will naturally be interested in the long-term survival and prosperity of your company. This involves growing your business, maintaining and increasing profits, and increasing the overall value of your company. However, if you represent a limited company, with shareholders and stock that can be bought and sold on the financial markets, then you will also need to be concerned with boosting your company’s stock price.
On the surface, it would seem that if you ensure that the company continues to grow and remains profitable, then the stock price will take care of itself. Of course, the underlying fundamental value of your company is a major driver of stock price, but it’s not the only one. Finding ways to increase your company’s stock value to make it more appealing to investors can be a separate concern aside from looking after the business itself. Any move to boost stock should also benefit the business, and increased stock value should also improve your company’s standing.
Stock price is primarily about supply and demand in the stock market, rather than how well a company is doing. The value of a stock is defined by how much an investor is prepared to pay for it. Investors will buy stock if they believe it will increase in value. Stock will increase in value if more investors buy it.
Company executives can take actions that will stimulate this process. Stock value is created by belief in the underlying value of the asset (your company) and a belief that the underlying value will increase over time. Investors need to have faith in the potential for growth of the company. The best way to encourage this faith is to make strategic decisions that maximize the future value of the company, rather than focusing on hitting short-term earnings targets by the end of the next quarter.
Growth investing is an investment strategy that looks for stock that will increase significantly in value over time, so it can be sold for a large profit. These investors are not concerned with short-term dividends but with an exit point where they can realize their profits in one sale. Although such investors often target new companies as these have more growth potential, existing enterprises can also attract growth investors if they can demonstrate the potential for long-term expansion.
Repurchasing or buying back your own stock is a simple way to potentially increase its value. First of all, this shows that you believe in your company’s future performance, which in turn gives potential investors more confidence in the stock. Secondly, it reduces the available supply of the stock in the market, so if demand remains steady, or increases, then the laws of supply and demand dictate that the value of the stock should increase.
The repurchased stock can also be used to make acquisitions, and this can increase the value of your company in the market. Any acquisitions should be thoroughly researched, as not every purchase of another company is beneficial or even viable. Be wary of overstretching your resources, or of buying a lame duck that doesn’t add value. However, a sensible acquisition or consolidation can lead to share prices increasing considerably.
If your company has a unique product or service that could have a potentially disruptive impact on the sector it operates in, then the current and future value of its stock is likely to be higher. However, for this to be the case, investors and potential investors must be aware of this and believe it to be true. This advice is most suitable for startups seeking funding, where having a clear, transformative vision and the means to realize it will undoubtedly attract investors. However, any company should consider its place in the market and how it can offer something radically different from its competitors.
Stock value isn’t always about a company’s current profits. A new company with rising stock prices may have negative net income because of the initial costs of bringing its product to market. What matters is the potential for growth, and the future value that investors believe the company and its stock will have.
Regular earnings reports, forecasts and projections can help to maintain stock value. The more information you give to potential investors, the more reliable your company will seem. Transparency inspires trust and allows investors to make confident, informed decisions. By putting profits back into your company and investing in the future, you create the best climate for growth and increased share value.