The Valuation Gap Is a Strategy Problem, Not a Market Problem

Most CFOs and founders assume their valuation is a function of performance.

Revenue is growing. Margins are steady. Why isn’t the market rewarding us?

But the truth is, valuation is just as much about perception as performance. And too often, that perception is based on misunderstood signals, misaligned metrics, or miscommunication with the very audience you're trying to win over.

You can't fix that with a better earnings script. You need to understand the system behind how your equity is priced and how to use it to your advantage.

Here are five hard truths and the frameworks that help close the gap between value delivered and value perceived:

1. Understand What’s Actually Driving Your Valuation

Every CFO I know has a dashboard of internal KPIs: CAC payback, net revenue retention, margins, efficiency. And that’s great, if you’re managing operations. But what about valuation? What about the external scoreboard?

“If you don’t have the metrics, you pound the table. If you do, you pound the numbers.”

You can run a great business and still be undervalued, simply because you’re tracking the wrong signals. The market might be rewarding free cash flow. Or leverage reduction. Or growth consistency. If you don’t know which metrics actually correlate with your stock price, you’re flying blind.

This is where a Market Factor Model comes in. It quantifies exactly how much of your valuation is market-driven (beta) and how much is company-specific (alpha). And more importantly, it isolates which KPIs move your valuation.

If you’re focused on metrics that don’t correlate to your share price, you're not just wasting time. You're burning credibility.

2. Stop Reacting. Design Your Investor Base Like a Funnel

One of the most costly mistakes management teams make is letting the current shareholder base define the IR strategy.

“Who owns us?” “Let’s go talk to them.”

But that’s like a sales team saying, “Let’s only talk to customers who already bought from us.”

You’re not in IR to take meetings. You’re in IR to attract and retain the right capital. That means knowing who should own your stock, based on return profile, time horizon, and risk appetite, and targeting them with precision.

Think like a growth marketer:

• Segment the audience
• Match your messaging
• Qualify the buyer
• Allocate CEO time strategically

Investor relations isn’t just communication. It’s capital acquisition. Treat it that way.

3. Build OKRs Backwards from the KPIs the Market Cares About

Here’s a simple test: If the metrics you report externally are not the ones you track internally, you’re running two businesses.

“You can tell when a company is running two books — one for operations, one for the street.”

This disconnect erodes trust. Investors want to see a clear link between what you say, what you measure, and what you do. When you report a KPI every quarter, but it doesn’t tie to any of your stated objectives, it reads as fluff. When you guide to a number that the team doesn’t actually use to run the business, it invites scrutiny.

The solution? Build alignment:

• Start with the valuation-linked KPIs (from factor analysis)
• Design OKRs that move those KPIs
• Let your messaging reflect the strategy behind the metrics

This creates what We calls a closed feedback loop — strategy → KPIs → OKRs → communication → trust → valuation uplift.

4. Use the Confidence Interval Framework to Decide What to Disclose vs. Guide

One of the most important decisions in IR is what to guide vs. what to just disclose. Too often, that choice is made based on pressure, not clarity.

Here’s the mental model I recommend:

1. High confidence → Guide
2. High variance → Disclose
3. Low control + high noise → Stay silent or contextualize

This isn’t about being conservative. It’s about being credible.

The second-order effect? It forces you to examine how well you actually understand your business model. If you can’t forecast a KPI with reasonable confidence, you have a bigger problem than investor messaging.

In short: Only guide to what you can explain with conviction, even in choppy waters.

5. Data Transfers Conviction

This is one of my favorite phrases, and it changes how companies show up.

“Data is one of the few things that transmits conviction from a management team to the market.”

Anyone can tell a story. But only data creates alignment between the boardroom, the ops team, and the buy-side analyst.

It’s what separates companies that get rewarded for execution from those that get penalized for uncertainty.

Here’s what conviction actually looks like in IR:

• “Here’s the metric we’re focused on.”
• “Here’s why it matters.”
• “Here’s what we said we’d do.”
• “Here’s the progress.”
• “Here’s the return story ahead.”

And if you can’t say those things clearly, you shouldn’t be guiding.

This isn’t about having a slick script. It’s about running the business in a way that creates clarity by default.

The Bottom Line

The companies that win in public markets aren’t always the best operators. They’re the ones who understand how to align their internal performance with external perception through data, messaging, and intent.

You don’t need to manufacture a story. You need to understand your valuation, use data to support it, and communicate it with confidence.

Because when the market gets frothy, investors don’t just look at the numbers. They ask: Do I believe this team can execute, and are they showing me how?

If your answer is yes, then your valuation should follow.