Stock illustration: A light guides rowers in the right direction

Outsized market performance yields plenty of benefits for publicly traded companies. It typically leads to higher incentive compensation and signals investor confidence in management. For the treasury function, it may also help them fund operations on advantageous terms or issue stock at favorable prices.

A higher market capitalization reduces a company's debt-to-equity ratio, which increases the likelihood of achieving an investment-grade credit rating (see Figure 1). Higher share prices can also serve as a useful currency to fund strategic mergers and acquisitions (M&A), since companies can either exchange stock or issue shares for cash to fund a transaction.

So, understanding how businesses drive market value is crucial not just for the C-suite at large, but for treasury and finance professionals especially. Research published by Fortuna Advisors offers insights into some characteristics that help companies produce exceptional market returns.

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Chris Moore

Chris Moore is a vice president at Fortuna Advisors. His previous publications include the “2024 Fortuna Advisors Value Leadership Report” and the “2024 Fortuna Advisors Buyback ROI Report.” Moore has supported clients in the energy, distribution and logistics, aerospace and defense, and gaming industries integrating RCE into strategic and operational frameworks, and incentive compensation design. You can reach him at [email protected].

Michael Chew

Michael Chew is manager of thought leadership at Fortuna Advisors. His recent publications include “Driving Outperformance: The Power and Potential of Economic Profit” (Journal of Applied Corporate Finance), the “2024 Fortuna Advisors Value Leadership Report,” and the “2024 Fortuna Advisors Buyback ROI Report.” Anyone interested in learning more about EP-based incentives and resource allocation can reach out to him at [email protected].